-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, P6W0SMHsFHM7se1tiLVrAGLrgNV+w23LKtFwu//4/8e4A64tZXOgwEZpB5wdSyWv sYSfuriXZ0A3T/x2ZAOcFg== 0000950134-98-004080.txt : 19980513 0000950134-98-004080.hdr.sgml : 19980513 ACCESSION NUMBER: 0000950134-98-004080 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980512 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SIENA HOLDINGS INC CENTRAL INDEX KEY: 0000060150 STANDARD INDUSTRIAL CLASSIFICATION: MORTGAGE BANKERS & LOAN CORRESPONDENTS [6162] IRS NUMBER: 751043392 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-06868 FILM NUMBER: 98616461 BUSINESS ADDRESS: STREET 1: 1600 VICEROY DR 8TH FLOOR CITY: DALLAS STATE: TX ZIP: 75235 BUSINESS PHONE: 2148794000 MAIL ADDRESS: STREET 1: 1600 VICEROY DR STREET 2: 8TH FLOOR CITY: DALLAS STATE: TX ZIP: 75235 FORMER COMPANY: FORMER CONFORMED NAME: LOMAS FINANCIAL CORP DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: LOMAS & NETTLETON FINANCIAL CORP DATE OF NAME CHANGE: 19881030 10-Q 1 FORM 10-Q FOR QUARTER ENDED MARCH 31, 1998 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES - ----- EXCHANGE ACT TO 1934 For the quarterly period ended March 31, 1998 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. -------------------- (FORMERLY LOMAS FINANCIAL CORPORATION) (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, Plano, Texas 75093 - ---------------------------------------- ---------- (Address of principal executive offices) (Zip code) (972) 381-4255 ---------------------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO --- --- APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 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 ISSUERS: The number of shares outstanding of each of the issuer's classes of common stock as of April 30, 1998: Common Stock, $.10 par value -- 4,000,000 shares. 2 SIENA HOLDINGS, INC. AND SUBSIDIARIES (FORMERLY LOMAS FINANCIAL CORPORATION AND SUBSIDIARIES) FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1998 INDEX ------
PAGE ----- PART I -- FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Consolidated Balance Sheets - March 31, 1998 and June 30, 1997........................................... 2 Statements of Consolidated Operations - Quarters and Nine Months Ended March 31, 1998 and 1997........... 3 Statements of Consolidated Cash Flows - Nine Months Ended March 31, 1998 and 1997........................ 4 Notes to Consolidated Financial Statements............................................................... 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations.................................................................................... 9 Liquidity and Capital Resources..........................................................................11 PART II -- OTHER INFORMATION Item 1. Legal Proceedings........................................................................................11 Item 3. Defaults Upon Senior Securities..........................................................................12 Item 6. Exhibits and Reports on Form 8-K.........................................................................12
1 3 PART I -- FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS. CONSOLIDATED BALANCE SHEETS SIENA HOLDINGS, INC. AND SUBSIDIARIES (FORMERLY LOMAS FINANCIAL CORPORATION AND SUBSIDIARIES) (IN THOUSANDS)
Reorganized Company -------------------------------------- March 31, 1998 June 30, 1997 ------------------- ------------------ (Unaudited) (Note) ASSETS Cash and cash equivalents................................................... $ 2,144 $ 1,941 Investment in real estate................................................... 4,800 4,800 Receivables................................................................. 55 242 Prepaid expenses and other assets........................................... 72 68 ------------------- ------------------ $ 7,071 $ 7,051 =================== ================== LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Liabilities: Accounts payable and accrued expenses....................................... $ 939 $ 990 Stockholders' equity (deficit): Preferred stock-- ($1 par value, 1,000 shares authorized, 0 shares issued and outstanding and 1,000 shares authorized at March 31, 1998 and June 30, 1997.................................................................... -- -- Common stock -- ($.10 par value, 15,000 shares authorized, 4,000 shares issued and outstanding and 15,000 shares authorized at March 31, 1998 and June 30, 1997............................................................... 400 400 Other paid-in capital....................................................... 5,772 5,747 Accumulated deficit......................................................... (40) (86) ------------------- ------------------ 6,132 6,061 ------------------- ------------------ $ 7,071 $ 7,051 =================== ==================
Note: The balance sheet at June 30, 1997, as presented is derived from the audited financial statements at that date. See notes to consolidated financial statements. 2 4 STATEMENTS OF CONSOLIDATED OPERATIONS (UNAUDITED) SIENA HOLDINGS, INC. AND SUBSIDIARIES (FORMERLY LOMAS FINANCIAL CORPORATION AND SUBSIDIARIES) (IN THOUSANDS, EXCEPT NET EARNINGS (LOSS) PER SHARE AMOUNTS)
Reorganized Predecessor Reorganized Predecessor Company Company Company Company ---------------- ---------------- ----------------- ------------------ Nine Months Nine Months Quarter Ended Quarter Ended Ended Ended March 31, 1998 March 31, 1997 March 31, 1998 March 31, 1997 ---------------- ---------------- ----------------- ------------------ Revenues: Commissions and fees .................. $ 56 $ 147 $ 267 $ 1,555 Interest .............................. 25 73 72 956 Investment ............................ -- -- -- 16 Gain on sales ......................... -- 65 -- 253 Other ................................. 106 74 313 455 ---------------- ---------------- ----------------- ------------------ 187 359 652 3,235 ---------------- ---------------- ----------------- ------------------ Expenses: Personnel ............................. 68 70 156 1,541 Depreciation and amortization ......... -- -- -- 106 Other operating ....................... 134 338 425 3,052 Loss on sale or disposal of assets .... -- -- -- 3,718 ---------------- ---------------- ----------------- ------------------ 202 408 581 8,417 ---------------- ---------------- ----------------- ------------------ Income (loss) from continuing operations before reorganization items .......... (15) (49) 71 (5,182) ---------------- ---------------- ----------------- ------------------ Reorganization items: Interest earned on cash accumulated ... -- 143 -- 3,049 Professional fees ..................... -- (749) -- (6,503) Other bankruptcy expenses ............. -- (68) -- (89) ---------------- ---------------- ----------------- ------------------ -- (674) -- (3,543) ---------------- ---------------- ----------------- ------------------ Income (loss) before federal income tax ... (15) (723) 71 (8,725) Federal income tax benefit (expense) ...... 5 -- (25) -- ---------------- ---------------- ----------------- ------------------ Net income (loss) ................ $ (10) $ (723) $ 46 $(8,725) ================ ================ ================= ================== Earnings (loss) per common share: Net income (loss) .................... $ (0.00) $ * $ 0.01 $ * Earnings (loss) per common share - assuming dilution: Net income (loss) .................... $ (0.00) $ * $ 0.01 $ * See notes to consolidated financial statements. * Per share amount is not meaningful due to reorganization.
3 5 STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED) SIENA HOLDINGS, INC. AND SUBSIDIARIES (FORMERLY LOMAS FINANCIAL CORPORATION AND SUBSIDIARIES) (IN THOUSANDS)
Reorganized Predecessor Company Company --------------- --------------- Nine Months Nine Months Ended Ended March 31, 1998 March 31, 1997 --------------- --------------- Operating activities: Net income (loss) ....................................................... $ 46 $ (8,725) Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities before working capital changes: Loss on sale or disposal of assets ................................. -- 3,718 Depreciation and amortization ...................................... -- 106 Federal income tax expense ......................................... 25 -- --------------- --------------- Cash provided (used) by operations before working capital changes ....... 71 (4,901) Net change in sundry receivables, payables, and other assets ............ 132 (2,332) --------------- --------------- Net cash provided (used) by operating activities .......... 203 (7,233) --------------- --------------- Investing activities: Purchases of investments ................................................ -- (12,383) Net sales of foreclosed real estate ..................................... -- 276 Net sales of fixed assets ............................................... -- 25,374 Proceeds from assets sold to First Nationwide Mortgage Corp ............. -- 6,160 Proceeds from settlement of intercompany dispute with LMUSA ............. -- 6,754 Transfer to Litigation Trust pursuant to reorganization plan ............ -- (3,000) Distribution of LMUSA pursuant to reorganization plan ................... -- (191,557) --------------- --------------- Net cash provided (used) by investing activities .......... -- (168,376) --------------- --------------- Financing activities: Term debt repayments .................................................... -- (11,632) --------------- --------------- Net cash provided (used) by financing activities .......... -- (11,632) --------------- --------------- Net increase (decrease) in cash and cash equivalents ......................... 203 (187,241) Cash and cash equivalents at beginning of period ............................. 1,941 197,800 --------------- --------------- Cash and cash equivalents at end of period ................................... $ 2,144 $ 10,559 =============== =============== Cash payments for: Interest ................................................................ $ -- $ -- Federal income tax ...................................................... $ -- $ --
See notes to consolidated financial statements. 4 6 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) SIENA HOLDINGS, INC. AND SUBSIDIARIES (FORMERLY LOMAS FINANCIAL CORPORATION AND SUBSIDIARIES) MARCH 31, 1998 NOTE A -- BASIS OF FINANCIAL STATEMENT PRESENTATION The accompanying unaudited consolidated financial statements include the accounts of Siena Holdings, Inc. ("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. As a result of the Chapter 11 proceedings discussed in "Note B - 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 did not become 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 April 1, 1997, after all material conditions required by the Plan were satisfied. The delay in the adoption of fresh-start accounting was due to uncertainties surrounding the resolution of claims and intercompany disputes between the LMUSA Creditors' Committee and the LFC Creditors' Committee. In accordance with 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 April 1, 1997. In addition, the accumulated deficit of the predecessor Company at April 1, 1997 was eliminated, and, the reorganized Company's financial statements reflected no beginning retained earnings or deficit. See "Item 8. Financial Statements and Supplementary Data" in the Company's annual Form 10-K for the year ended June 30, 1997 for more details on fresh-start reporting. 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 post-reorganization operating results (the "Reorganized Company") from pre-reorganization operating results (the "Predecessor 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 financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. They do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Certain reclassifications have been made to prior quarters' financial statements to conform to the current presentation. Operating results for the quarter and nine months are not necessarily indicative of the results that may be expected for the fiscal year. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual Form 10-K for the year ended June 30, 1997. NOTE B -- 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 Chapter 11 cases were jointly administered until October 1, 1996. The Debtor Corporations managed their businesses in the ordinary course as debtors-in-possession subject to the control and 5 7 supervision of the Federal Bankruptcy Court for the District of Delaware (the "Bankruptcy Court") from October 10, 1995 through October 4, 1996. On October 23, 1995, a single creditors' committee (the "Joint Creditors' Committee") was appointed by the U.S. Trustee for the District of Delaware (the "U.S. Trustee") to represent creditors of all the Debtor Corporations. On March 15, 1996, the U.S. Trustee revoked the appointment of the Joint Creditors' Committee and appointed statutory committees of unsecured creditors of LFC (the "LFC Creditors' Committee") and of LMUSA (the "LMUSA Creditors' Committee"). The Debtor Corporations filed two separate proposed plans of reorganization with the Bankruptcy Court. LFC, LIS and LAS (the "Joint Debtors") filed their proposed joint plan of reorganization on April 8, 1996 and subsequently filed their first amended joint plan of reorganization on May 13, 1996 and their second amended joint plan of reorganization on July 3, 1996. An order confirming the second amended joint plan of reorganization filed on October 4, 1996 and a stipulation and order among the Joint Debtors and 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". LMUSA filed its own proposed plan of reorganization on April 8, 1996 and subsequently filed its own proposed first amended plan of reorganization on May 13, 1996 and its second amended joint plan of reorganization on July 3, 1996 (the "LMUSA Plan" and together with the Joint Plan, the "Plans"). In addition, on July 3, 1996, the Joint Debtors filed with the Bankruptcy Court a proposed form of disclosure statement relating to the Joint Plan (the "Joint Disclosure Statement"), and LMUSA filed with the Bankruptcy Court a substantially similar proposed form of disclosure statement (with the same Exhibits as the Joint Disclosure Statement) relating to the LMUSA Plan (the "LMUSA Disclosure Statement" and together with the Joint Disclosure Statement, the "Disclosure Statements"). The LMUSA Plan was confirmed by the Bankruptcy Court on October 1, 1996, was discharged from the bankruptcy case, and changed its name to Nomas Corp. As a result of LMUSA's reorganization plan, LFC distributed its interest in LMUSA to LMUSA's creditors as of October 1, 1996. This distribution decreased the Company's assets and liabilities by $293.3 million and $419.4 million, respectively, and stockholders' equity was increased by $126.1 million. The operations of LMUSA are included in the Statements of Consolidated Operations and the Statement of Consolidated Cash Flows through the date of distribution of LMUSA. The Joint Plan was confirmed on October 4, 1996, by the Bankruptcy Court. The Joint Plan's effectiveness was conditioned on the satisfaction, or waiver by the LFC Creditors' Committee, of certain conditions. On January 23, 1997, the LFC Creditors' Committee and the LMUSA Creditors' Committee signed an agreement in respect of intercompany claims (the "Intercompany Agreement"). The Intercompany Agreement was approved by the Bankruptcy Court on February 21, 1997. As a result of the settlement, certain assets were transferred to the Company on the effective date of March 7, 1997. The LFC Creditors' Committee waived all other conditions and the Joint Plan became effective March 7, 1997 and the Company emerged with a new name, Siena Holdings, Inc. See Exhibit 10.1, Exhibit 10.2 and Exhibit 10.3 which are filed as exhibits to the Company's annual Form 10-K for the year ended June 30, 1997. The following is a summary of the claims, excluding administrative, as of the initial distribution date (as defined herein), (in thousands): Priority LIS claims - allowed $ 234 Convenience claims - allowed . 1 Unsecured Class 3 claims - Bondholders - allowed ... 145,433 Other claims - allowed .. 1,366 MSP claims - disputed ........ 8,803 -------- $155,837 ========
6 8 Pursuant to the Joint Plan, the Class 3 unsecured creditors will receive a combination of cash and new common stock as settlement of their allowed claim. On November 12, 1997, the initial distribution date (the "Initial Distribution Date"), $12.5 million was disbursed to the distribution agent for distribution to the Class 3 unsecured creditors. In addition, as assets in the Creditors' Trust (see "Note D - Creditors' Trust") are liquidated, additional distributions will be made to the Class 3 unsecured creditors. Also, on the Initial Distribution Date pursuant to the Joint Plan and a decision by the LFC Creditors' Committee, 4,000,000 shares of the new common stock were issued by the stock transfer agent. For balance sheet presentation and earnings (loss) per share, the 4,000,000 shares were considered issued as of April 1, 1997. A second distribution of available cash to the former creditors is expected in the forth quarter. THE 4,000,000 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 FORM 10-K FOR THE YEAR ENDED JUNE 30, 1997. 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 Litigation Trust. See "Note D - 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 NOTE D - CREDITORS' TRUST. NOTE C -- ASSETS DISPOSED OF AND LIABILITIES ASSUMED On October 2, 1995, LMUSA closed the sale to First Nationwide Mortgage Corporation ("First Nationwide") of its GNMA servicing portfolio (approximately $7.9 billion in unpaid principal balance of mortgage loans), its investment in LMUSA Partnership and its loan production business including its mortgage loans held for sale and the payment of the related warehouse lines of credit (the "GNMA Sale"). On January 31, 1996, LMUSA closed the sale to First Nationwide of its remaining mortgage servicing portfolio (approximately $12 billion in unpaid principal balance of mortgage loans) and certain other assets pursuant to Section 363 of the Bankruptcy Code (the "Section 363 Sale"). The above transactions resulted in a loss on sale or disposal of assets in the Company's Statements of Consolidated Operations of $3.7 million for the nine months ended March 31, 1997. These transactions were subject to additional adjustments which are solely the responsibility of Nomas Corp. as a result of the distribution of LMUSA by the Company. On July 16, 1996, the former Lomas headquarters and all other campus buildings were sold through the Bankruptcy Court process for $23.5 million. Pursuant to a stipulation and order among Travelers Insurance Company ("Travelers"), the Debtors', and the LMUSA Creditors' Committee, Travelers received approximately $11.43 million of the proceeds. The net cash received was deposited into a joint account for the Company and LMUSA. In conjunction with the intercompany claims settlement process in March, 1997, the Company received $1.3 million and LMUSA was granted the remainder plus accrued interest from the joint account. Additionally, substantially all of the remaining furniture, fixtures and equipment of the Company and LMUSA were sold by a liquidator during July and August 1996. NOTE D -- CREDITORS' TRUST The Joint Plan established a creditors' trust (the "Creditors' Trust") 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 the creditors in accordance with the terms of the Joint Plan. The Creditors' Trust is organized for the sole purpose 7 9 of liquidating the non-reorganized assets including proceeds, if any from the LFC/LMUSA Litigation Trust 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 Sheets 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 Statements 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 amounts realized from the collection of the trust assets and settlement of trust liabilities. Stockholders who are not former creditors are not beneficiaries of the Trust There can be no assurance that the LFC/LMUSA Litigation Trust will produce any proceeds which will benefit the Creditors Trust and former creditors. The following is a summary of the non-reorganized assets and liabilities held in the Creditors' Trust as of March 31, 1998 (in thousands) (unaudited): Cash held in reserve for payment of administrative expenses and other trust liabilities $ 1,769 Accounts payable and accrued expenses ................................................. (1,477) -------- Cash available for future trust expenses * ..................................... $ 292 ======== Cash held in reserve for payment of certain claims .................................... $ 55 ======== MSP Trust cash held in reserve pending settlement of MSP claims and expenses .......... $ 6,708 ======== Net assets of the Creditors Trust: Cash ............................................................................ $ 6,239 Cash reserved for contingent obligations ........................................ 4,158 Investments: Two limited partnerships which fund institutional mortgage loans ........... 714 Residual cash in the MSP Trust pending settlement of MSP claims and expenses 1,579 Other ...................................................................... 21 -------- Total investments .................................................... 2,314 -------- Net assets of the Creditors Trust ................................... $ 12,711 ========
* Pursuant to the Joint Plan, an additional $300,000 of cash has been set aside for the payment of additional Creditors' Trust expenses. On January 14, 1998, the Creditors' Trust received $8.1 million pursuant to the final settlement of a subordinated promissory note. The settlement was approved by the Bankruptcy Court on December 29,1997. Also on December 29, 1997, the Bankruptcy Court approved the procedures to be used in settlement of the MSP litigation (see "Part II Other Information, Item 1. Legal Proceedings"). Under the approved procedures the Creditors' Trust and the beneficiaries of the MSP will share the assets remaining in the trust equally after payment of certain legal expenses and MSP trust fees, projected to be $0.4 million. The procedures include application to federal district court for approval of a class action and settlement. As of March 31, 1998, no action has been taken by the federal district court. If the settlement is approved, the MSP Trust cash held in reserve pending settlement of MSP 8 10 claims and expenses would be $3.9 million as of March 31, 1998, thus increasing the Residual cash in the MSP Trust pending settlement of MSP claims and expenses available for distribution to Class 3 unsecured creditors by $2.4 million. The ultimate amount to be distributed to MSP claimants may differ from the above, pending the outcome of all bankruptcy and legal proceedings. These proceeds are solely for the benefit of the former creditors. 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 NOTE B - REORGANIZATION. NOTE E -- EARNINGS (LOSS) PER SHARE During the second quarter of 1998 the Company adopted SFAS 128 "Earnings Per Share" ("FAS 128") which replaces the presentation of primary earnings per share ("EPS") with a presentation of basic EPS and requires dual presentation of basic and diluted EPS. The Company retroactively applied FAS 128 to the quarter ended September 30, 1997. Adoption of FAS 128 did not have a material impact on the earnings (loss) per share. Earnings (loss) per common share for the quarter and nine months ended March 31, 1998 was computed using the 4,000,000 shares reserved for issuance and ultimately issued on November 12, 1997. The effects of outstanding options are included in the calculation of earnings per common share - assuming dilution to the extent that they are dilutive to earnings. Effective December 1, 1997 the Company granted options under the Siena Holdings, Inc. Nonqualified Stock Option Agreements (the "Nonqualified Stock Option Agreements"), included as exhibits to the Company's quarterly report Form 10-Q as of December 31, 1997, which are considered in the calculation of earnings (loss) per common share - assuming dilution. Earnings (loss) per share information for the predecessor is not presented because of the revision of the Company's capital structure pursuant to the Plan of Reorganization makes such information not meaningful. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. RESULTS OF OPERATIONS 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. See "Note A - Basis of Financial Statement Presentation". 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 operating results of the Predecessor Company from those of the Reorganized Company since they are not prepared on a comparable basis. On October 1, 1996, the Company distributed its interest in LMUSA to LMUSA's creditors pursuant to LMUSA's reorganization plan. Effective March 7, 1997, the Company settled its intercompany disputes with LMUSA resulting in the transfer of assets and writeoff of receivables and payables with a net increase in retained earnings of $16.8 million. See "Note B - Reorganization". 9 11 The operating results of the Company during the quarters and nine months ended March 31, 1998 and 1997 were as follows (in thousands):
Reorganized Predecessor Reorganized Predecessor Company Company Company Company --------------- --------------- -------------- -------------- Nine Months Nine Months Quarter Ended Quarter Ended Ended Ended March 31, March 31, March 31, March 31, 1998 1997 1998 1997 --------------- --------------- -------------- -------------- Operating income (loss): Mortgage banking.............................. $ -- $ -- $ -- $ (1,340) Assisted care management...................... 31 111 191 376 Other......................................... 125 187 344 571 ----------- ---------- ---------- ----------- 156 298 535 (393) Expenses: General and administrative.................... (171) (347) (464) (1,071) Loss on sale or disposal of assets............ -- -- -- (3,718) ----------- ---------- ---------- ----------- (171) (347) (464) (4,789) ----------- ---------- ---------- ----------- Income (loss) from operations before reorganization items.......................... (15) (49) 71 (5,182) Reorganization items---net....................... -- (674) -- (3,543) ----------- ---------- ---------- ----------- Income (loss) before federal income tax benefit (expense)............................. (15) (723) 71 (8,725) Federal income tax benefit (expense)............. 5 -- (25) -- ----------- ---------- ---------- ----------- Net income (loss)............. $ (10) $ (723) $ 46 $ (8,725) =========== ========== ========== ===========
The operating results presented above for the quarter and nine months ended March 31, 1998 are not comparable to those for the same periods in fiscal year 1997. The first quarter of fiscal 1997 included the operations of LMUSA prior to the distribution of LMUSA from the Company on October 1, 1996. During that period, LMUSA recorded an additional loss on the sale of assets of $3.7 million as a result of an adjustment to the calculation of interest on the receivables from First Nationwide and an agreed upon settlement of the final purchase price on the GNMA sale. Additionally, during the quarter and nine months ended March 31, 1997, the Company recorded net reorganization items of $0.7 million and $3.5 million, respectively. At fresh start on April 1, 1997, certain assets were transferred to the Creditors' Trust. See "Note D - Creditors' Trust". This resulted in lower income for the quarter and nine months ended March 31, 1998 than for the same periods in the prior fiscal year as it relates to those assets that were transferred to the Creditors' Trust. The decrease in the profitability of the assisted care management operations from $111,000 and $376,000 for the quarter and nine months ended March 31, 1997, respectively, to $31,000 and $191,000 for the quarter and nine months ended March 31, 1998, respectively, is primarily attributable to the decreased management fee received by Siena Housing Management, Inc. ("SHM"), a wholly-owned subsidiary of the Company. 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"). Treemont elected to begin significant capital improvements for fire protection that are to be funded by operations. These expenditures decreased the quarterly management fee received by SHM beginning with the second quarter of fiscal year 1998 and will continue to result in lower management fees until the completion of the project which is expected to be finished by the end of fiscal year 1998. After December 31, 1997, Treemont will no longer pay the Company for pension benefits paid to the employees of SHM. The reduction in Treemont expense will reduce the effect of the capital expenditures on SHM revenue during fiscal year 1998. Refer to the Company's annual report on Form 10-K for the fiscal year ended June 30, 1997 for more information on the Company's assisted care business and management contract. 10 12 The Company reported other operating income of $125,000 and $344,000 for the quarter and nine months ended March 31, 1998, respectively, including an overhead allocation based upon managements estimate of resources used by the Creditors' Trust and charged to the Creditors' Trust of $105,000 and $263,000 for the quarter and nine months ended March 31, 1998. The allocation of overhead to the Creditors' Trust is expected to decrease over time. The remaining income consisted of investment and dividend income. Other operating income for the quarter and nine months ended March 31, 1997 included investment and dividend income related to assets that were transferred to the Creditors' Trust as of April 1, 1997, and therefore are not comparable to the quarter and nine months ended March 31, 1998. The Company has reviewed the real estate interests held in its subsidiary LLG Lands, Inc. and has begun to market the property zoned for multi-family use. The Company holds approximately 150 net acres of undeveloped land in Allen, Texas. Of this total, approximately 37 net acres are zoned for multi-family use, the remaining net acreage is zoned for single family use and commercial use. The Company will attempt to increase the values of the property through the re-zoning and relocation of zoning in certain tracts. The re-zoning is subject to significant municipal review and there can be no assurance that the re-zoning request will be approved. Refer to the Company's annual report on Form 10-K for the fiscal year ended June 30, 1997 for more information on the Company's real estate investment. General and administrative expenses decreased from the same period in fiscal year 1997 as a result of the significant decrease in the number of employees or consultants and related occupancy and other office expenses. Effective December 1, 1997, the Board of Directors of the Company approved the separate retention agreements for its two officers, John P. Kneafsey - Chief Executive Officer and W. Joseph Dryer - President, (the "Retention Agreements") included as exhibits to the Company's quarterly report on Form 10-Q for the quarter ended December 31, 1997. 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. The Retention Agreements also awarded stock options to Mr. Kneafsey and Mr. Dryer pursuant to the SHI Nonqualified Stock Option Agreements included as exhibits to the Company's quarterly report on Form 10-Q for the quarter ended December 31, 1997. The stock options resulted in related expense of $4,000 and $5,000 for the quarter and nine months ended March 31, 1998. LIQUIDITY AND CAPITAL RESOURCES As of March 31, 1998, the only liabilities of the Company were accounts payable and accrued expenses which will be paid from current operating cash available as of March 31, 1998. PART II -- OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. The Company had a Management Security Plan ("MSP") for certain of its employees. According to the MSP, key employees of the Company who participated in the MSP are to be paid, in the event of retirement or death, a portion of the employee's salary which such employee chose as the basis for computation of retirement or death benefits. The Company ceased new enrollments in 1985. The LFC Creditors' Committee has argued that the funds contributed to the MSP are held in a trust (the "MSP Trust") subject to the claims of creditors in the event of insolvency. Because of the bankruptcy filings by the Company and LMUSA, no contributions, payments or actuarial evaluation have been made to the MSP since the petition date. On June 11, 1996, the Bankruptcy Court authorized the LFC Creditors' Committee to commence and prosecute an action against the trustee seeking the return of funds held in such MSP Trust. The LFC Creditors' Committee contends that the funds in the trust constitute property of the Company's estate. However, the trustee, Bankers Trust, has asserted that the trustee is obligated to hold the assets for the sole benefit of the MSP participants. In addition, during the course of litigation, the Unofficial Committee of MSP Beneficiaries filed a motion to intervene in the adversary proceeding which the Bankruptcy Court granted, and filed an action against Bankers Trust to turn over to the MSP beneficiaries the assets held in the MSP Trust. 11 13 On April 29, 1997, pursuant to a Stipulation and Order Regarding Reserve for MSP Claimants, the Bankruptcy Court authorized the Company to maintain a single distribution reserve in the amount of $6.3 million in order to satisfy any obligations to the MSP Claimants under the Joint Plan. On March 31, 1998, the balance of the MSP Trust was $8.3 million. Pursuant to the above stipulation, $6.3 million of the MSP Trust balance is to be held in reserve for MSP claimants. The remainder of the MSP Trust, $2.0 million, net of a reserve of $0.4 million for MSP related legal fees and expenses, is included as an asset in the Creditors' Trust subject to resolution of the MSP litigation. The preliminary MSP disputed claims total $8.8 million. On December 29, 1997, the Bankruptcy Court approved procedures for a settlement whereby the MSP claimants would receive fifty percent of the MSP Trust balance after deducting certain legal fees and MSP trust expenses. The procedures include application to federal district court for approval of a class action and settlement. As of March 31, 1998, no action has been taken by the federal district court. If the settlement is approved by a federal district court, the MSP Trust cash held in reserve pending settlement of MSP claims and expenses would be $3.9 million as of March 31, 1998, thus increasing the Residual cash in the MSP Trust pending settlement of MSP claims and expenses available for distribution to Class 3 unsecured creditors by $2.4 million. The ultimate amount to be distributed to the MSP claimants and to the Class 3 unsecured creditors may differ from the above, pending the outcome of all bankruptcy and legal proceedings. These proceeds are solely for the benefit of the former creditors. The LFC Committee also commenced an adversary proceeding to recover the funds in the rabbi trust for the Company's Excess Benefit Plan (the "EBP Trust") on September 20, 1996, having obtained the Bankruptcy Court's approval for such action on September 9, 1996. Bankers Trust, the trustee of the EBP Trust, agreed that the Company is entitled to the funds held in the EBP Trust, and accordingly, funds totaling $0.6 million were received by the Company in June, 1997 and subsequently transferred to the Creditors' Trust for the benefit of former creditors. The remaining funds were received in July 1997. On August 28, 1996 the Bankruptcy Court authorized the LFC Committee to commence an action against Residential Information Services Limited Partnership ("RIS") and certain of its affiliates and related companies. In a complaint dated September 30, 1996, the LFC Committee commenced such an action. On January 10, 1997, the LFC Committee filed an amended complaint. The amended complaint contains, inter alia, claims for breach of contract, fraud, tortuous interference with contract, turnover and quantum meruit against RIS and the other defendants in connection with RIS' acquisition of substantially all of the assets of Lomas Information Systems, Inc. in December 1994. The amended complaint seeks substantial damages from the defendants together with interest, costs and attorneys' fees and punitive damages. This case was settled and proceeds of $5.4 million were received in June 1997 by the Company and subsequently transferred, net of $234,000 for certain administrative claims, to the Creditors' Trust. These proceeds are solely for the benefit of the former creditors. ITEM 3. DEFAULTS UPON SENIOR SECURITIES. Refer to the Company's annual Form 10-K for the year ended June 30, 1997, for information regarding defaults by the Company relating to the debt obligations of the Predecessor Company. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits: EXHIBIT NUMBER DESCRIPTION ------- ------------ (11) Computation of Earnings (Loss) Per Share (27) Financial Data Schedule (submitted to the Securities and Exchange Commission for its information). (b) Reports on Form 8-K: None. 12 14 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. SIENA HOLDINGS, INC. ------------------------------- (Registrant) Date: May 12, 1998 By: /s/ W. JOSEPH DRYER ------------------------------- President Date: May 12, 1998 By: /s/ W. JOSEPH DRYER ------------------------------- Principal Accounting Officer 13 15 EXHIBIT INDEX EXHIBIT NUMBER DESCRIPTION - -------- ----------- 11 Computation of Earnings (LOSS) Per Share 27 Financial Data Schedule EX-11 2 STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE 1 EXHIBIT 11 --------- SIENA HOLDINGS, INC. AND SUBSIDIARIES (FORMERLY LOMAS FINANCIAL CORPORATION AND SUBSIDIARIES) COMPUTATION OF EARNINGS (LOSS) PER SHARE (IN THOUSANDS, EXCEPT PER SHARE DATA)
Reorganized Predecessor Reorganized Predecessor Company Company Company Company ---------------- ---------------- --------------- --------------- Quarter Ended Quarter Ended Nine Months Nine Months March 31, March 31, Ended Ended 1998 1997 March 31, March 31, 1998 1997 ---------------- ---------------- --------------- --------------- EARNINGS (LOSS) PER COMMON SHARE: Average common shares outstanding 4,000 * 4,000 * Net income (loss) $ (10) * $ 46 * Earnings (loss) per common share: Net income (loss) $ 0.00 * $ 0.01 * EARNINGS (LOSS) PER COMMON SHARE - ASSUMING DILUTION: Average common shares outstanding 4,000 * 4,000 * Average common stock equivalent under SHI Nonqualified Stock Option Plan 93 * 33 * ---------------- ---------------- --------------- --------------- TOTAL SHARES 4,093 * 4,033 * ================ ================ =============== =============== Net income (loss) $ (10) * $ 46 * Earnings (loss) per common share - assuming dilution: Net income (loss) $ (0.00) * $ 0.01 *
* Average shares outstanding and per share amount not meaningful due to reorganization. EX-27 3 FINANCIAL DATA SCHEDULE
5 0000060150 JOSEPH DRYER 1,000 9-MOS JUN-30-1998 JUL-01-1997 MAR-31-1998 2,144 0 55 0 0 0 0 0 7,071 0 0 0 0 400 5,732 7,071 0 652 0 0 (581) 0 0 71 (25) 46 0 0 0 46 0.01 0.01
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