SCHEDULE 14C INFORMATION
INFORMATION STATEMENT PURSUANT TO SECTION 14(C)
OF THE SECURITIES EXCHANGE ACT OF 1934
Check the appropriate box:
[X] Preliminary Information Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14c-5(d)(2))
[ ] Definitive Information Statement
LINC Capital, Inc.
(Name of Registrant As Specified in Charter)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11
(1) Title of each class of securities to which transaction applies:
________________________________________________________________________________
(2) Aggregate number of securities to which transaction applies:
________________________________________________________________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
Filing Fee: $14,780.00. Fee determined pursuant to Rule 0-11(c)(2) based
upon bona fide estimate of aggregate proceeds of $73,900,000 upon the sale
of substantially all assets.
________________________________________________________________________________
(4) Proposed maximum aggregate value of transaction: $73,900,000.00
________________________________________________________________________________
(5) Total fee paid: $14,780.00
________________________________________________________________________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
________________________________________________________________________________
(2) Form, Schedule or Registration Statement No.:
________________________________________________________________________________
(3) Filing Party: LINC Capital, Inc.
________________________________________________________________________________
(4) Date Filed: October 23, 2000
<PAGE>
Preliminary Filing- Not for Distribution
LINC CAPITAL, INC.
303 East Wacker Drive
Ninth Floor
Chicago, Illinois 60601
(312) 946-1000
INFORMATION STATEMENT
Summary Term Sheet
LINC Capital, Inc. is engaging in the sale of its assets in order to
repay its debts. Under Delaware law, this action may constitute the sales
of all or substantially all of LINC's assets. Because of this, the
Securities and Exchange Commission requires that LINC provide all
stockholders with information about the sales in this information
statement.
The following are some of the questions that you, as a stockholder of
LINC, may have and our answers to those questions. Additional important
information is contained in the remainder of this information statement. We
urge you to read carefully the entire information statement.
What is the purpose of the sales?
Because LINC's financial situation has deteriorated, we have
experienced difficulties in meeting our financial obligations. Since March
2000, we have been in default of covenants under our loan and
securitization agreements. Substantially all of the assets owned by LINC,
and not held by securitizations entities, are pledged to lenders under its
revolving credit agreement to secure borrowings under that agreement. We
have negotiated a forbearance agreement with these lenders under which they
have agreed not to accelerate our indebtedness and foreclose on our assets
so long as we meet certain conditions. However, under the original terms of
the revolving credit agreement we are obligated to repay the remaining
$73.9 million balance under our revolving credit agreement by December 31,
2000. The sales of assets being undertaken by LINC are intended to permit
us to raise funds to fulfill the terms of the agreement and pay down our
revolving credit debt on schedule. However, there is no assurance that the
proceeds of these sales will be sufficient to fully repay the balance of
our secured debt and to provide for payment of amounts that are owed to
unsecured creditors. See the "Background Information" section of this
information statement.
Which of LINC's assets will be sold?
The board of directors has determined to either sell or realize the
proceeds from our assets in lieu of sale, such as collecting lease payments
on leases which cannot be sold for what the board considers a fair and
reasonable price, so as to meet our financial obligations. The available
assets include the assets of our rental and distribution business, equity
securities held by our select growth leasing division, lease portfolios
owned by LINC and the related equipment residual values, as well as LINC's
ownership interests in lease securitization entities. See the "Sales
Process" section of this information statement.
What are the terms of the sales?
LINC has entered into a non-binding letter of intent to sell
substantially all of the assets of its analytical instrument rental and
distribution business. Since completion of this sale is subject to a number
of contingencies, including the completion of due diligence and obtaining
financing, it is not certain that it will be completed. However, if it is
completed, the sale proceeds available to repay debt are expected to range
from $20 to $22 million. We are also in the process of negotiating the
terms of a number of potential sales of our lease portfolios and other
assets. The specific terms of those sales will be determined as the
negotiations proceed. The asset sales in process may conceivably result in
proceeds which, when taken together with the proceeds from selling or
realizing other assets, may or may not be sufficient to pay our revolving
credit indebtedness. See the "Sales Process" section in this information
statement.
Has the board of directors approved of the sales?
The board of directors and the holders of voting rights for the
majority of LINC's common stock have approved the proposed sales of assets
to pay down debt. See the "Approval of Board of Directors" section of this
information statement.
Will the stockholders receive any of the proceeds from the sales?
LINC is not currently able to predict if there will be funds remaining
from the proceeds of the sales after the payment of revolving credit
indebtedness or other debts. Therefore, LINC's board of directors has not
yet determined whether, if there are any assets remaining after the sales
of assets contemplated to be undertaken through December 31, 2000, the
company should be restructured, reorganized, dissolved or liquidated. If it
is determined to dissolve and liquidate, any distributions to stockholders
would be made first to the holders of preferred stock to the extent of
their liquidation preference.
* * * * *
This information statement is being furnished to holders of shares of
common stock, par value $.001 per share, of LINC Capital, Inc., a Delaware
corporation, in connection with the written consent of the holders of the
voting rights for a majority of LINC's outstanding common stock to the sale
of its assets.
This information statement is first being mailed to stockholders on or
about _________, 2000. This information statement is furnished for
information purposes only. LINC IS NOT ASKING YOU FOR A PROXY AND YOU ARE
REQUESTED NOT TO SEND US A PROXY.
The Stockholder Consent
Section 271 of the Delaware General Corporation Law permits a Delaware
corporation to sell all or substantially all of its assets if the sale is
approved in writing by the holders of a majority of the shares of
outstanding common stock. Martin E. Zimmerman, the entities controlled by
him and members of senior executive management have the right to vote a
majority of the outstanding common stock of LINC and have consented in
writing to the proposed sales. This written consent satisfies the Delaware
law stockholder approval requirements.
Description of Business
LINC is a finance company that previously, until its financial
difficulties, provided leasing and asset-based financing and still provides
equipment rental and distribution services to businesses. LINC's principal
activities have included:
- the direct origination of leases and accounts receivable and other
asset-backed financing to emerging growth companies primarily serving
the telecommunications, high-tech manufacturing, Internet-related and
information technology industries, also known as the select growth
finance business;
- the financing of leases generated by other, generally smaller,
equipment lessors, also known as the portfolio finance business;
- the rental, leasing and distribution of analytical instruments and
related equipment to companies serving the environmental,
pharmaceutical and biotechnology industries and the leasing and
distribution of equipment to Internet-related businesses, also known
as the rental and distribution business; and
- the establishment of leasing programs for manufacturers and
distributors, also known as the vendor finance business.
and substantially all of its vendor finance business units. LINC continues
the operations of its analytical instrument rental and distribution
business, which represents the largest portion of the business activity.
LINC has continued operations on a substantially reduced basis at its LINC
Monex vendor business in Houston, Texas. As a consequence of the cessation
of substantially all of its leasing activities, LINC has reduced overall
employment to 74 persons as of October 15, 2000 from 221 persons at
December 31, 1999. Of those 74 persons, 38 are employed in the analytical
instrument rental and distribution business.
Background
For the fiscal year ended December 31, 1999, LINC reported a net loss of
$21.53 million, including provisions for impairment of assets of $14.2 million.
For the fiscal quarter ended June 30, 2000, LINC reported a net loss of $13.29
million, or $2.55 per share, including provisions for impairment of assets and
credit losses totaling $11.58 million, or $2.20 per share. For the six months
ended June 30, 2000, LINC reported a net loss of $14.72 million, or $2.83 per
share. On August 6, 2000, LINC's common stock, which traded under the symbol
"LNCC," was de-listed from the Nasdaq National Market due to failure to comply
with Nasdaq's minimum market capitalization requirements and certain other
conditions. LINC's common stock currently trades in the over-the-counter market.
On [________ __, 2000], the last trading day preceding the delivery of this
information statement, the high and low sale prices per share of common stock
were [$ . ] and [$ . ], respectively.
In the second quarter of 1999, the board of directors began consulting with
LINC's management as well as its financial and legal advisors to consider a
variety of options to raise the funds necessary to support LINC's increased new
business operations and to meet LINC's growing capital needs. In April 1999,
LINC commenced efforts to raise additional capital from private sources. In May
1999, LINC obtained an acceptable proposal for additional capital and extensive
due diligence was commenced by the potential investor in May 1999. In late July
1999, the potential private investor withdrew its proposal. In early August
1999, as a result of the withdrawal of that potential investor and because of
LINC's inability to access the needed additional capital on acceptable terms,
the board retained the services of US Bancorp Piper Jaffray to investigate
opportunities to optimize shareholder value. With Piper Jaffray's assistance,
the board concluded that the best available option to protect shareholder value
was to attempt to sell LINC, in its entirety, to a suitable buyer.
The board's determination to attempt to sell LINC to a larger, better
financed company was based on various factors including LINC's inability to
secure additional capital on acceptable terms in the second and third quarters
of 1999 which led LINC to substantially reduce its leasing business during the
last quarter of 1999 and in early 2000.
From September 1999 to February 2000, Piper Jaffray sought proposals from
over twenty companies. During this period, indications of interest were received
from five companies. These indications were narrowed down to two proposals that
would have led to the sale of LINC in its entirety or a merger with a larger,
better capitalized specialty finance company. Each of these proposals were
acceptable to the board of directors and the holders of voting rights over a
majority of our common stock. From December 1999 through late February 2000,
each of the potential acquirers performed due diligence on our operations.
In the fourth quarter of 1999, LINC terminated origination of leases in its
portfolio finance business. In December 1999, LINC determined that it would
terminate new lease originations in its select growth leasing business and
substantially reduce new lease origination goals in its vendor finance business.
At that time, we determined to continue the operations of our profitable rental
and distribution business. We were further faced with the scheduled expiration
of our revolving credit facility in January 2000 as well as an industry-wide
reduction in liquidity to companies in the specialty finance sector in which
LINC competed. In January 2000, in order to supplement our capital base while
the efforts to sell LINC were continuing and as a condition of renewal of LINC's
revolving credit agreement, LINC issued $5,250,000 in Series A Redeemable
Preferred Stock, 42.6% of which was purchased by LINC management.
In February 2000 one of the potential purchasers of LINC withdrew its
proposal. Extensive negotiations continued with the second potential acquirer
until mid-March 2000 at which time it became apparent that completion of the
acquisition would involve material regulatory difficulties, an extended period
of time and an extremely uncertain likelihood of completing the sale. As a
consequence, negotiations were terminated by mutual agreement. The board
concluded that a sale of LINC in its entirety could not be accomplished on
acceptable terms within an acceptable time frame because of the lack of success
in such sales effort to that point and in view of the impact industry-wide
illiquidity was having on other companies which might otherwise have had an
interest in acquiring LINC.
Toward the end of the first quarter of 2000, we found significant
unanticipated credit losses and delinquencies in two of our small vendor finance
businesses acquired in 1998 and 1999 which put further stress on LINC's capital
structure. As a result of those events and LINC's deteriorating financial
condition, on March 25, 2000, LINC notified its revolving credit lenders and
securitization liquidity providers that it would be in default of certain
covenants under its revolving credit agreement and securitization facilities. As
a result of these defaults, LINC was no longer permitted by its lenders to fund
new leases and LINC's ability to continue operations of its profitable rental
and distribution businesses was limited.
From March 2000 through the date of this filing, the lenders under LINC's
revolving credit agreement have refrained from accelerating our debt
obligations, foreclosing on assets in which they have security interests, and
exercising other remedies. In addition, the liquidity providers to LINC's
commercial paper conduit securitization facility have refrained from exercising
their rights to increase the interest rate under that facility and to require
that the securitized lease portfolio be sold. However, amortization of amounts
outstanding on our commercial paper conduit securitization facility and on the
term securitization facility has been accelerated resulting in an interruption
in the cash flow available to LINC from these facilities. In addition, in
connection with the agreements reached with our revolving credit lenders and the
providers of our securitization facilities, we have been required to outsource
the servicing of substantially all of our owned and securitized lease
portfolios. This outsourcing has resulted in elimination of the servicing fees
we received from the securitization entities. However, we believe that we have
reduced our expenses at least proportionately.
The board of directors, in dealing with the financial deterioration of
LINC, has closely monitored the developments and difficulties LINC faced by
meeting six times as a full board and three times through its special committee
of the board in 1999 and twenty times as a full board and three times through
its special committee of the board in 2000 to date. Further, in March 2000, the
board accepted the resignation of LINC's chairman and chief executive officer
and created an office of the chairman to deal with the challenges presented by
LINC's unanticipated decline in financial condition.
When LINC defaulted on its revolving credit loan and securitization
agreements in March 2000, we chose to seek alternative means of refinancing or
repaying indebtedness in order to avoid a lengthy and costly bankruptcy process.
Additionally, in choosing to reach an out of court settlement with our primary
secured creditors under a forbearance agreement rather than seek bankruptcy
protection, LINC has been able to reduce overhead costs more quickly and reduce
the costs of professional and other fees, which would have grown substantially
in a bankruptcy proceeding. The board concluded that an out of court
restructuring under the recently concluded forbearance agreement provides LINC
with an opportunity to seek to obtain the highest values for its assets without
the administrative costs of a bankruptcy proceeding.
In April 2000, LINC made its initial proposal to its secured creditors that
would result in an out of court restructuring through termination of all leasing
activities, outsourcing of servicing of its lease portfolio to reduce overhead,
sale or refinancing of its owned and non-securitized lease portfolio and a sale
or refinancing of its analytical instrument rental and distribution business. In
order to maintain value in its profitable analytical instrument rental and
distribution business, LINC proposed that its secured creditors permit the
continuation of this business in the ordinary course. LINC's lenders have
refrained from accelerating their indebtedness and foreclosing on their
collateral while LINC has implemented this proposal.
In April 2000, LINC engaged Piper Jaffray to assist in selling or
refinancing its lease portfolios and its analytical instrument rental and
distribution business and also engaged KPMG to assist it in its negotiations
with lenders.
In March and April 2000, as a result of the defaults under its revolving
credit agreement and commercial paper securitization facility, LINC terminated
all new portfolio finance and vendor finance leasing activities. In May 2000,
LINC sold a large proportion of its remaining select growth lease portfolio at a
modest profit to a large specialty finance company and terminated all select
growth operations. In connection with this sale, LINC has retained a portion of
its select growth portfolio which LINC is continuing to collect and LINC
retained a portfolio of equity securities in its select growth lessees that it
believes has substantial value. This sale avoided certain employee costs for
those employees who resigned from LINC to join the purchaser of the select
growth portfolio.
In September 2000, LINC completed the outsourcing of servicing of its lease
portfolio and entered into a definitive forbearance agreement with its lenders.
Since April 1, 2000, LINC has reduced indebtedness under the revolving credit
agreement and the balance of its commercial paper conduit securitizations
facility to $73.9 million and $122 million, respectively, at September 30, 2000
and from $101 million and $178 million, respectively, at March 31, 2000 through
sales and the scheduled amortization of portions of its lease portfolios. LINC
has reduced its corporate and leasing head count to 36 persons at October 15,
2000 from 182 persons at December 31, 1999. Head count in its analytical
instrument rental and distribution business has remained essentially unchanged
from December 1999 levels at 38 people.
Under the forbearance agreement between LINC and its lenders under the
revolving credit agreement, LINC must repay the outstanding balance by December
31, 2000 in accordance with the original terms of the revolving credit
agreement. The forbearance agreement requires that the balance outstanding under
the credit agreement be reduced to $70 million by October 31, 2000, $63 million
by November 30, 2000 and to be repaid in full by December 31, 2000. The
agreement provides for the payment of up to $1 million in fees to the lenders
under certain circumstances and for an increase in the interest rate under the
agreement to 3.00% over LIBOR from its former interest rate of 1.75% over LIBOR.
The forbearance agreement contains provisions that permit the lenders to
immediately accelerate their indebtedness and exercise their remedies under the
revolving credit agreement, in the event of certain events of default, including
such events as:
- failure to pay the loans down as scheduled;
- the exercise by other creditors of LINC who are owed over $500,000 of
their remedies or their obtaining a judgment against LINC;
- the failure of LINC to meet 120% of its operating expense budgets; and
- the loans outstanding under the revolving credit agreement exceeding
the borrowing base formula by $12 million at any time.
It is possible that LINC may not be able to meet all of the criteria or
maintain compliance with all the conditions established by the forbearance
agreement on a timely basis or at all. In this case, LINC may be required to
file for protection under the Bankruptcy Code. In addition, because LINC has a
number of unsecured creditors whose debts are past due, it is possible that
certain of these creditors could claim that the contemplated sales of assets
will violate their contractual rights or exercise other legal remedies. Any such
action would result in further deterioration of LINC's financial condition and
reduce the possibility that LINC would have any value in excess of its
indebtedness.
Approval of Board of Directors
The board of directors has concluded that LINC cannot continue its existing
businesses as such businesses are currently operated and that orderly, out of
court sales of its businesses and assets rather than the commencement of
bankruptcy proceedings or other alternatives is in the best interests of LINC's
creditors and stockholders. As a consequence, the board of directors has
approved sales of assets or, if some of the leases and related residual values
cannot be sold for what we consider reasonable prices, the collection of
receivables under those leases. LINC's assets consist primarily of its
non-securitized lease portfolio, its analytical instrument rental and
distribution business, its equity interest in its equipment lease securitization
entities and equity interests in select growth lessees. The holders of the right
to vote a majority of our common stock have approved of these proposed sales of
assets, subject to the sale or realization proceeds being enough, in the board's
view, to at least pay off our revolving credit debt.
LINC intends to use the net proceeds realized from these sales of assets to
first repay indebtedness secured by the related assets sold or liquidated and
then to pay claims of unsecured creditors and holders of subordinated debt. LINC
is not certain that the proceeds of sale or liquidation of assets, after
operating expenses, will be sufficient in amount to accomplish these objectives.
LINC's board of directors has not yet determined whether, if there are any
assets remaining, the company should be restructured, reorganized, dissolved or
liquidated. If it is determined to dissolve and liquidate, any distributions to
stockholders would be made first to the holders of preferred stock to the extent
of their liquidation preference.
Sales Process
LINC has retained the services of Piper Jaffray to assist in locating
suitable buyers for LINC's assets. LINC has offered its analytical instrument
rental and distribution business to nine potential buyers and, on October 12,
2000, it executed a letter of intent to sell this business to a newly formed
entity controlled by a private equity fund. The letter of intent contains
numerous contingencies and there is no assurance that this sale will be
completed. The purchaser is in the process of its due diligence investigation
and arranging for financing. If this sale is completed, LINC estimates that net
proceeds of $ 20 million to $ 22 million will be received and used to repay
revolving credit indebtedness.
LINC has provided information regarding the sale of its remaining lease
portfolios to seven potential buyers. Management of LINC and its financial
advisors believe that as a result of current market conditions in the leasing
industry, which include a historically high level of failures of leasing
companies, reduction of the number of finance companies interested in the
purchase of lease portfolios and a low level of liquidity in the industry, it is
unlikely that it will find a single purchaser for the entirety of its remaining
lease portfolio at an acceptable price.
Since April 2000, LINC has realized approximately $39 million from the sale
of portions of its owned and securitized lease portfolio to a number of
purchasers, including entities from whom LINC purchased portfolios from its
portfolio finance activities, the proceeds of which have been used to repay
indebtedness under its revolving credit agreement and lower the principal amount
of its commercial paper securitizations facility. LINC is currently negotiating
with three lessors regarding the purchase of the largest portion of the
remainder of the lease portfolio that secures the balance of its revolving
credit agreement, which at June 30, 2000 had a net investment of $70 million.
These negotiations remain ongoing and no agreements have yet been reached and
there is no assurance that any such agreements will be completed by December 31,
2000.
LINC does not currently expect to immediately sell its equity interests in
its securitization entities. Those equity interests are difficult to sell until
the level of debt in those securitization entities has been substantially
reduced and the residual value of the remaining assets can be determined with
greater certainty. Therefore, LINC expects to realize these interests as the
related remaining lease portfolios are amortized or to sell the remaining
investment when market conditions for such purchases improve.
LINC currently holds equity securities in 50 select growth lessees, nine of
which are publicly traded. The market value of the equity securities in publicly
traded lessees at October 19, 2000 was $19.9 million, the substantial majority
of which is attributable to the value of LINC's holdings in Corvis Corporation.
The market values of these equity securities fluctuate daily within their
markets. LINC intends to sell the holdings it has in Corvis Corporation and
other publicly held companies in its portfolio promptly following the lifting of
restrictions on their sale. Such restrictions on the sale of Corvis Corporation
securities will be removed on January 31, 2000. LINC currently expects to hold
the remaining securities it has in private companies until the companies are
sold or become publicly held.
Use of Sales Proceeds
The proceeds of the proposed sales will be used in the following order of
priorities:
(a) pay operating expenses associated with the sale and liquidation of the
assets, including but not limited to interest expense, compensation of
employees and executives, including bonus and severance arrangements,
investment banking fees, fees of our professionals and of our secured
lenders' professionals and the forbearance fee of up to $1 million to its
revolving credit lenders;
(b) pay down indebtedness under our revolving credit agreement; and
(c) pay delinquent amounts owing to unsecured trade and other creditors.
We cannot assure that the proceeds of sales of assets will be sufficient to
pay all these amounts in full.
Certain Tax Consequences
The proposed sales will be taxable transactions to LINC for income tax
purposes. As a result of provisions relating to recapture of depreciation on
leased equipment and other provisions of the Internal Revenue Code, these sales
may result in taxable gains. However, as a result of net operating loss
carry-forwards existing at December 31, 1999, as well as substantial losses for
tax purposes generated during the year 2000, we do not anticipate that LINC will
incur a material federal income tax liability as a result of these sales. After
giving full effect to the proposed sales of assets, LINC will likely retain
substantial net operating loss carry-forwards.
Regulatory Matters
Should a purchaser of LINC's assets have over $100 million in sales or
assets and be purchasing assets from LINC in excess of $15 million, such sale
may not be consummated until notifications have been given and certain
information has been furnished to the Federal Trade Commission and the Antitrust
Division of the Department of Justice and the specified thirty-day waiting
period requirements have been satisfied under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules promulgated thereunder by
the Federal Trade Commission. The waiting period may be shortened by the
government agency. LINC has been advised that the sale of its analytical
instrument rental and distribution business will require such notification.
Interests of Certain Persons in the Proposed Sales of Assets
Some purchasers of LINC's assets may request that some of LINC's officers
and/or directors become employees of or consultants to the purchasers. LINC
understands that as a condition of the sale of LINC's analytical instrument
rental and distribution business, the purchaser has offered employment and
equity ownership to Robert Laing, President of LINC, and Gerard Farren,
Executive Vice-President of LINC's analytical instrument rental and distribution
business.
No Appraisal Rights
Pursuant to Delaware law, holders of shares of common stock will not be
entitled to rights of appraisal in connection with the proposed sales of assets.
Accounting Treatment
The proposed sales of assets will be accounted for under the purchase
method of accounting.
Selected Consolidated Financial Data
The following table sets forth selected consolidated statement of
operations and financial position data for the periods indicated. The financial
data for each of the four years in the period ended December 31, 1998 are
derived from our audited consolidated financial statements. The financial data
for the year ended December 31, 1999 are derived from our consolidated financial
statements on which we received an audit report, but which report did not
express an opinion. The financial data for the six months ended June 30, 2000
and 1999 are derived from our unaudited condensed consolidated financial
statements. The unaudited financial statements include all adjustments,
consisting of normal recurring accruals, that management considers necessary for
a fair presentation of our financial position and results of operations as of
such dates and for such periods. The results of the six months ended June 30,
2000 are not necessarily indicative of full year results. The following amounts
should be read in conjunction with the consolidated financial statements and
notes thereto contained in our other filings with the Securities and Exchange
Commission available as described under "Where You May Find Additional
Information" in this information statement.
<TABLE>
<CAPTION>
Six Months Ended June 30, Years Ended December 31,
<S> <C> <C> <C> <C> <C> <C> <C>
2000 1999 1999 1998 1997 1996 1995
(In thousands, except per share data)
Statement of Operations Data:
Revenues:
Sales of equipment $ 20,623 $ 16,009 $ 34,941 $ 32,929 $ 23,131 $22,595 $ 13,852
Direct finance lease income 19,658 12,933 33,438 12,300 5,981 3,055 1,467
Interest income 1,789 1,638 3,573 2,194 877 283 47
Rental and operating lease 4,258 5,377 10,942 9,412 7,492 7,034 9,043
revenue
Servicing fees and other 1,690 3,948 6,603 3,792 2,026 2,376 3,168
income
Gain (loss) on sale of lease (9) 355 1,284 6,839 880 - -
receivables
Gain on equipment residual 441 563 1,321 1,752 860 450 44
values
Gain on equity participation 328 1,238 1,603 3,824 430 263 -
rights
Total revenues 48,778 42,061 93,705 73,042 41,677 36,056 27,621
Expenses:
Cost of equipment sold 16,575 13,067 28,526 26,789 18,549 18,242 11,477
Selling, general and 13,609 11,561 23,790 17,824 8,973 8,008 7,524
administrative (net)
Interest 16,662 9,030 24,686 8,956 4,298 2,545 1,750
Depreciation of equipment 3,011 3,553 7,273 6,073 4,226 3,647 4,054
Amortization on intangibles 865 510 1,428 502 280 226 212
Provision for credit losses 8,266 2,888 15,966 5,280 1,253 749 1,060
Impairment loss on assets 4,509 - 14,177 - - -
Restructuring charges - - 700 - - - -
Total expenses 63,497 40,609 116,546 65,424 37,579 33,417 26,077
Earnings (loss) from continuing
operations before provision for (14,719) 1,452 (22,841) 7,618 4,098 2,639 1,544
income taxes and minority interest
Income tax expense (benefit) - 406 (1,307) 3,024 1,627 1,084 747
Net earnings (loss) from continuing
operations before minority interest (14,719) 1,046 (21,534) 4,594 2,471 1,555 797
Minority interest - - - - (13) (120) (34)
Net earnings (loss) from continuing $(14,719) $1,046 $(21,534) $ 4,594 $ 2,458 $1,435 $ 763
operations
Net earnings (loss) from continuing
operations per common
share:
Basic $ (2.83) $ 0.20 $ (4.10) $ 0.89 $ 0.73 $ 0.48 $ 0.25
Diluted (2.83) 0.19 (4.10) 0.86 0.72 0.45 0.25
Shares used in computing net income per
common share:
Basic 5,265 5,243 5,254 5,171 3,372 2,991 3,006
Diluted 5,265 5,371 5,254 5,347 3,397 3,162 3,103
Dividends declared per common share $ - $ - $ - $ - $ - $ 0.26 $ -
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended June 30, Years Ended December 31,
<S> <C> <C> <C> <C> <C> <C> <C>
2000 1999 1999 1998 1997 1996 1995
(In thousands)
Balance Sheet Data:
Net investment in direct finance leases $ 372,041 $317,736 $ 436,820 $ 164,970 $ 67,653 $34,778 $ 17,861
and loans
Equipment held for rental and operating 27,407 31,147 26,115 30,659 22,007 15,048 18,500
leases, net
Securitization retained interest 399 12,697 444 17,026 3,017 - -
Total assets 443,880 405,873 512,888 248,884 108,977 67,200 58,604
Senior credit facility and other senior 87,180 104,201 102,754 96,646 38,117 29,605 31,914
notes payable
Recourse debt 2,302 6,191 3,898 8,017 2,955 3,361 882
Nonrecourse debt 309,871 213,331 347,352 68,616 17,951 8,276 4,997
Subordinated debentures 6,266 5,869 6,059 5,694 5,386 5,127 4,953
Total liabilities 432,610 362,478 491,637 207,443 72,273 53,258 46,411
Redeemable preferred stock 5,827 - - - - - -
Stockholders' equity $ 5,443 $ 43,395 $ 21,215 $ 41,441 $ 36,704 $13,942 $ 12,193
</TABLE>
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding the beneficial
ownership of LINC's common stock and preferred stock as of October 20, 2000:
(a) by each person known by LINC to own beneficially more than five percent
of such outstanding common and preferred stock;
(b) by each director;
(c) by the former chief executive officer and the next four most highly
compensated executive officers in 1999; and
(d) by all executive officers and directors of LINC as a group.
Each of such stockholders has sole voting and investment power as to shares
shown unless otherwise noted.
<TABLE>
<CAPTION>
Common Preferred
<S> <C> <C> <C> <C>
Name Shares Owned Percent of Class Shares Owned Percent of Class
Beneficially (2) Beneficially (2)
Martin E. Zimmerman 2,919,129 51.4% 60 26.67%
(1) (4) (5)
Allen P. Palles (3) (4) (5) 352,033 6.2 8 3.56%
Robert E. Laing (3) (4) (5) 350,324 6.2 10 4.44%
Terrence J. Quinn 52,507 0 (less than 1%) 0 0
Gerard M. Farren 18,200 0 3 1.33%
William F. DeMars 12,500 0 0 0
All directors and executives as 4,244,010 74.7% 96 42.67%
a group (8 persons)
</TABLE>
(1) Includes 624,674 shares held by Mr. Zimmerman as trustee under trusts for
the benefit of his two children, 23,000 shares held by LFC Capital, an
entity controlled by Mr. Zimmerman, and 702,357 shares held by Mr. Laing,
Mr. Palles (including 30,000 shares held by The Palles Family Trust, the
beneficiaries of which are Mr. Palles' wife and children and under which
Mr. Palles has disclaimed a beneficial interest) and 146,986 shares held by
a former employee of LINC for which Mr. Zimmerman holds proxies.
(2) Includes shares obtainable upon exercise of stock option which are or
become exercisable prior to January 22, 2001 as follows: Mr. Zimmerman,
55,641 shares; Mr. Palles, 55,389 shares; Mr. Laing, 78,496 shares; Mr.
Quinn, 13,333 shares; Dr. Farren, 5,000 shares; Mr. DeMars, 12,500 shares;
and all directors and executive officers as a group, 178,188 shares. The
percentages set forth in the above table give effect to the exercise of
these options.
(3) All shares are subject to a proxy held by Mr. Zimmerman, except shares
obtainable upon exercise of stock options under the 1997 Stock Initiative
Plan which are or become exercisable prior to January 22, 2001 as follows:
Mr. Palles, 20,532 shares and Mr. Laing, 43,639 shares.
(4) This person;s address is 303 East Wacker Drive, Chicago, IL 60601.
(5) Includes the following purchases of preferred stock: initially, 87,000
shares for Mr. Zimmerman, 14,500 for Mr. Laing, and 11,600 for Mr. Palles;
and then on the last day of each month starting February 29, 2000 and
ending September 30,2000, 21,750 shares per month for Mr. Zimmerman, 3,625
per month for Mr. Laing and 2,900 per month for Mr. Palles.
Where You May Find Additional Information
LINC is subject to the informational requirements of the Securities and
Exchange Act of 1934, as amended, and accordingly files reports, proxy
statements and other information with the Securities and Exchange Commission.
Attached are copies of LINC's Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 2000 and its Annual Report on Form 10-K for the fiscal
year ended December 31, 1999. With respect to the fiscal year ended December 31,
1999, the auditors' report concludes that the auditors could not express an
opinion because of doubt about LINC's ability to continue as a going concern due
to LINC's default on its loan and securitization agreements.
The reports, proxy statements and other information filed by LINC with the
Commission can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the Commissions' Regional Offices at 7
World Trade Center, 13th Floor, New York, New York 10048 and Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. The
Commission maintains a Web site that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission, including LINC. The address is http://www.sec.gov. Copies
of such material also can be obtained from the Public Reference Section of the
Commission, Washington, D.C. 20549 at prescribed rates.
