-----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, MonAkwT4rNgAgg5TR5liGmPP+TZQh4gjL9oh1iqPvMexCGsMwuUcgmcimizdJ/32 84/vGVh4lZlw9JKDRiqKuw== 0000950134-95-002928.txt : 19951119 0000950134-95-002928.hdr.sgml : 19951119 ACCESSION NUMBER: 0000950134-95-002928 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951114 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: LIBERTE INVESTORS/ CENTRAL INDEX KEY: 0000060153 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 751328153 STATE OF INCORPORATION: MA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-06802 FILM NUMBER: 95592088 BUSINESS ADDRESS: STREET 1: 600 N PEARL ST STREET 2: STE 420 LOCKBOX 168 CITY: DALLAS STATE: TX ZIP: 75201 BUSINESS PHONE: 2148795800 MAIL ADDRESS: STREET 1: 600 N PEARL ST STREET 2: STE 420 LOCKBOX 168 CITY: DALLAS STATE: TX ZIP: 75201 10-Q 1 FORM 10-Q 1 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 OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1995 OR --- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR TRANSITION PERIOD FROM __________ TO __________ COMMISSION FILE NUMBER 1-6802 LIBERTE INVESTORS (Exact name of Registrant as specified in its Charter) CREATED UNDER DECLARATION OF TRUST 75-1328153 PURSUANT TO THE LAWS OF (I.R.S. Employer THE COMMONWEALTH OF MASSACHUSETTS Identification No.) (State or other jurisdiction of incorporation or organization) 600 N. PEARL ST., SUITE 420, LB 168 75201 DALLAS, TEXAS (Zip Code) (Address of principal executive offices) Registrant's telephone number, including area code (214) 720-8950 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 Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. YES X * NO ----- ----- * The registrant's confirmed plan of reorganization did not provide for a distribution of securities; however, all required documents and reports have been timely filed by the Registrant both prior to and after confirmation. APPLICABLE ONLY TO CORPORATE ISSUERS: The number of shares outstanding of each of the issuer's class of securities as of November 10, 1995: Shares of Beneficial Interest, no par value - 12,153,658 shares. 2 FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1995 LIBERTE INVESTORS INDEX Page ---- PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) Consolidated Balance Sheet - September 30, 1995 and June 30, 1995 . . 3 Consolidated Statement of Operations - Three Months Ended September 30, 1995 and 1994 . . . . . . . . . . . . . . . . . . . 4 Consolidated Statement of Cash Flows - Three Months Ended September 30, 1995 and 1994 . . . . . . . . . . . . . . . . . . . 5 Notes to Consolidated Financial Statements . . . . . . . . . . . . . . 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS . . . . . . . . 7 PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . 10 SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 INDEX TO EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 2 3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEET LIBERTE INVESTORS AND SUBSIDIARY
September 30, June 30, 1995 1995 (Unaudited) (See Note) ----------- ---------- Assets Notes Receivable: RPI $ 5,287,359 $ 5,406,132 Mortgage loans 221,124 401,240 Foreclosed real estate: Nonearning - NOTE B 4,991,918 15,385,214 ------------ ------------ 10,500,401 21,192,586 Less: Allowance for possible losses 106,405 10,498,922 ------------ ------------ 10,393,996 10,693,664 Unrestricted cash and cash equivalents 20,857,266 20,576,517 Restricted cash and cash equivalents 58,870 59,245 Accrued interest and other receivables 127,523 103,888 Other assets 604,826 602,664 ------------ ------------ $ 32,042,481 $ 32,035,978 ============ ============ - ------------------------------------------------------------------------------------------------------------- Liabilities and Shareholders' Equity Liabilities Accrued and other liabilities $ 457,253 $ 416,164 Shareholders' Equity Shares of Beneficial Interest, no par value, unlimited authorization: 12,423,208 issued and 12,153,658 outstanding, net of 269,550 shares held in Treasury, at September 30, 1995 and June 30, 1995 31,585,228 31,619,814 ------------ ------------ $ 32,042,481 $ 32,035,978 ============ ============
NOTE: The balance sheet at June 30, 1995, has been derived from the audited financial statements at that date. See notes to consolidated financial statements. 3 4 CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited) LIBERTE INVESTORS AND SUBSIDIARY
Three Months Ended September 30, ------------------------------------- 1995 1994 ----------- ------------ Income Notes receivable interest $ 120,420 $ 244,328 Investment interest 304,482 115,180 Gain on disposition of real estate 6,840 -- Consulting and other 68,130 101,210 ----------- ------------ 499,872 460,718 ----------- ------------ Expenses Provision for possible losses -- 510,000 Salaries and related costs 100,100 182,791 General and administrative 95,144 91,876 Legal, audit and advisory 255,958 21,754 Foreclosed real estate 61,234 98,010 Management fees -- 70,621 Trustees' fees and expenses 17,100 13,800 ----------- ------------ 529,536 988,852 ----------- ------------ Net loss $ (29,664) $ (528,134) ============ ============ Net loss per Share of Beneficial Interest $ (.00) $ (.04) Weighted average number of Shares of Beneficial Interest 12,153,658 12,423,208 Cash dividends declared per share -- --
See notes to consolidated financial statements. 4 5 CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) LIBERTE INVESTORS AND SUBSIDIARY
Three Months Ended September 30, ---------------------------------- 1995 1994 -------------- ------------- Operating activities: Net loss $ (29,664) $ (528,134) Noncash expenses and revenues included in net loss: Provision for possible losses -- 510,000 Net change in other receivables, assets and liabilities 1,287 708,379 Gains from disposition of foreclosed real estate (6,840) -- -------------- ------------- Net cash provided (used) by operating activities (35,217) 690,245 -------------- ------------- Investing activities: Collections on mortgage loans 128,415 24,285 Collections on RPI note receivable 118,773 237,547 Advances on mortgage loans -- (38,536) Expenditures on foreclosed real estate -- (60,502) Proceeds from the disposition of foreclosed real estate 68,403 307,492 Net sales (purchases) of restricted cash investments 375 (141,193) -------------- ------------- Net cash provided by investing activities 315,966 329,093 -------------- ------------- Net increase in unrestricted cash and cash equivalents 280,749 1,019,338 Unrestricted cash and cash equivalents at beginning of period 20,576,517 9,157,640 -------------- ------------- Unrestricted cash and cash equivalents at end of period $ 20,857,266 $ 10,176,978 ============== ============= Schedule of noncash investing and financing activities: Charge-offs to allowance for possible losses, net - NOTE B $ 10,392,517 $ 1,460,743
See notes to consolidated financial statements. 5 6 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) LIBERTE INVESTORS AND SUBSIDIARY SEPTEMBER 30, 1995 NOTE A - BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and 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. Operating results for the three months ended September 30, 1995, are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 1996. For further information, refer to the financial statements and footnotes included in the Annual Report on Form 10-K of Liberte Investors for the fiscal year ended June 30, 1995, as amended, and "Item 5. Other Information" included herein. The accompanying financial statements include the accounts of Liberte Investors and Liberte Corp., a wholly-owned subsidiary which is currently inactive. All intercompany balances and transactions have been eliminated. As used herein, the "Trust" refers to Liberte Investors and its subsidiary. NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Adoption of Authoritative Statements: Effective July 1, 1995, the Trust adopted Statement of Financial Accounting Standards ("SFAS") No. 114, "Accounting by Creditors for Impairment of a Loan," as amended by SFAS No. 118, "Accounting by Creditors for Impairment of a Loan - Income Recognition and Disclosures." SFAS No. 114 requires that the impaired value of a loan be based on either (i) the present value of expected future cash flows discounted at the loan's effective interest rate, or (ii) the fair value of the collateral if the repayment of the loan is expected to be provided solely by the collateral. The adoption of the new statement did not have a material effect on the Trust's financial condition, results of operations, or cash flows. At September 30, 1995, the Trust had one impaired loan with a carrying value of $212,579 and thirteen impaired loans, from prior foreclosure related deficiency judgments, with no carrying value. There is no allowance allocated to these assets. Income from impaired loans is recorded on a cash basis, and during the quarter ended September 30, 1995, totaled $68,130. During the quarter ended September 30, 1995, the average month-end recorded investment in impaired loans was $212,579. Effective July 1, 1995, the Trust adopted SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." The statement requires that assets held for disposal be carried at the lower of their carrying amount or fair value less cost to sell. The adoption of the new statement did not have a material effect on the Trust's financial condition, results of operations, or cash flows, as foreclosed real estate was previously carried at fair value less estimated cost to sell. The balance sheet effect of adopting SFAS No. 121 was the netting of allocated reserves against the related foreclosed real estate. Restatement of previously issued financial statements is not permitted. At September 30, 1995, the Trust held assets to be disposed of consisting of foreclosed real estate, in the form of land and developed single family lots. The September 30, 1995, carrying amount of these assets was $4,991,918. The single family lots are being sold on a quarterly basis and are expected to be completely liquidated by the end of fiscal 1997. The carrying amount of these lots was $2,136,544 at September 30, 1995. 6 7 The balance of the Trust's foreclosed real estate consists of 14 parcels of land totaling approximately 608 acres in San Antonio, Texas. Certain parcels are under contract for sale and the balance are being marketed for sale at prices comparable to similar assets in the San Antonio area. The Trust expects to liquidate these parcels on a quarterly basis over the next two fiscal years. Reclassifications: Certain amounts in previously issued financial statements have been reclassified to conform to the September 30, 1995, presentation. NOTE C - COMMITMENTS AND CONTINGENCIES At September 30, 1995, the Trust had commitments for indemnification of development bond issuers and other guarantees totaling $211,445. Cash and cash equivalents at September 30, 1995, included restricted cash of $58,870 for claims due to bankruptcy. At June 30, 1995, restricted cash included $59,245 for claims due to bankruptcy. The Trust is involved in routine litigation incidental to its business, which, in the opinion of management, will not result in a material adverse impact on the Trust's financial condition, results of operations, or cash flows. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Operations resulted in a loss of $29,664 for the quarter ended September 30, 1995, compared to a loss of $528,134 for the same period in fiscal 1995. The substantial reduction in operating losses is due to various factors discussed below, the largest factor being no provision for possible losses was taken in the quarter ended September 30, 1995. Notes receivable interest income decreased to $120,000 in the first quarter of fiscal 1996 from $244,000 in the first quarter of fiscal 1995. The decrease was the result of a lower average outstanding balance of earning notes, partially offset by a nominal increase in yield. Average earning notes decreased to $5.4 million with a yield of 8.52% in the first quarter of fiscal 1996 from $11.7 million with a yield of 8.23% in the first quarter of fiscal 1995. This reduction is primarily a result of the foreclosure of a $4.8 million note receivable (the underlying collateral has since been disposed of for cash), and repayments of indebtedness by borrowers. Average nonearning notes for the first quarter of fiscal 1996 totaled $286,000 compared to $268,000 for the comparable period in fiscal 1995. Assuming the yield on these notes would have been the same as the yield on earning notes had they been on earning status, interest income would have been $6,000 higher in the first quarter of fiscal 1996 and $5,500 higher in the first quarter of fiscal 1995. Investment interest income increased to $304,000 in the first quarter of fiscal 1996 from $115,000 in the first quarter of fiscal 1995. This is primarily due to an increase in unrestricted cash and cash equivalents to $20.9 million on September 30, 1995, from $10.2 million on September 30, 1994. Gain on disposition of real estate represents proceeds received from the sale of foreclosed real estate in excess of its carrying value. 7 8 Consulting fees and other income decreased in the quarter ended September 30, 1995, primarily due to the early buyout of the consulting agreement between the Trust and Resurgence Properties Inc. in December 1994. This decrease was partially offset by cash collections on impaired loans which had no carrying value. There was no new loan production during the quarter ended September 30, 1995. The Trust committed to fund one new investment origination totaling $686,000 during the quarter ended September 30, 1994. No provision for possible losses was made in the first quarter of fiscal 1996 compared to a provision of $510,000 in the first quarter of fiscal 1995. The allowance for possible losses was $106,000 at September 30, 1995, compared to $10.5 million at June 30, 1995, and $10.8 million at September 30, 1994. The substantial reduction in the allowance is a result of applying such allowance to the carrying value of foreclosed real estate upon the adoption of SFAS No. 121. The Trust believes the allowance for possible losses is adequate at September 30, 1995. See NOTE B - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. The following is a summary of transactions affecting the Trust's allowance for possible losses for the three months ended September 30, 1995, compared to the three months ended September 30, 1994.
Quarter Ended September 30, 1995 ---------------------------------------------------- Mortgage Foreclosed Loans Real Estate Total -------------- -------------- ------------- Balance at July 1, 1995 $ 129,901 $ 10,369,021 $ 10,498,922 Reclassifications - SFAS No. 121 -- (10,331,733) (10,331,733) Amounts charged off, net of recoveries (23,496) (37,288) (60,784) -------------- -------------- ------------- Balance at September 30, 1995 $ 106,405 $ -- $ 106,405 ============== ============== ============= Quarter Ended September 30, 1994 ---------------------------------------------------- Mortgage Foreclosed Loans Real Estate Total -------------- -------------- ------------- Balance at July 1, 1994 $ 1,562,921 $ 10,146,474 $ 11,709,395 Provision for possible losses -- 510,000 510,000 Amounts charged off, net of recoveries 45,573 (1,506,316) (1,460,743) -------------- -------------- ------------- Balance at September 30, 1994 $ 1,608,494 $ 9,150,158 $ 10,758,652 ============== ============== =============
Salaries and related costs were substantially reduced for the quarter ended September 30, 1995, as compared to the same period in the prior year. Reductions during fiscal 1996 were primarily a result of a reduced compensation package for the Chief Executive Officer as compared to fiscal 1995. Legal, audit and advisory expenses increased mainly due to expenses incurred in connection with activities related to potential acquisition candidates. During September 1995, however, the Trust's discussions with these candidates terminated without reaching an agreement. Management fees were eliminated in the first quarter of fiscal 1996 due to the termination of the Management Agreement with Lomas Management in February 1995. The Trust is currently self managed. 8 9 LIQUIDITY AND CAPITAL RESOURCES The Trust is currently debt free. Its principal funding requirements are operating expenses, including legal, audit, and advisory expenses expected to be incurred in connection with evaluating potential acquisition candidates. The Trust's primary sources of funding operating expenses are collections on notes receivable, proceeds from the sale of foreclosed real estate, and investment interest. MATERIAL CHANGES IN FINANCIAL CONDITION The adoption of certain authoritative accounting statements resulted in a netting of substantially all of the Trust's allowance for possible losses on its foreclosed real estate against the previously reported gross carrying value. See NOTE B - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 9 10 PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: (27) Financial Data Schedules (submitted to the SEC for its information). (b) Reports on Form 8-K: None. 10 11 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 thereunder duly authorized. LIBERTE INVESTORS Date: November 10, 1995 By: /s/ TED ENLOE ------------------------------------------ Ted Enloe President and Chief Executive Officer Date: November 10, 1995 By: /s/ BRADLEY S. BUTTERMORE ----------------------------------------- Bradley S. Buttermore Principal Accounting and Financial Officer 11 12 LIBERTE INVESTORS INDEX TO EXHIBITS Exhibit No. (27) Financial Data Schedules (submitted to the SEC for its information) 12 EX-27 2 FINANCIAL DATA SCHEDULE
5 3-MOS JUN-30-1996 JUL-01-1995 SEP-30-1995 20,916,136 0 6,240,832 106,405 4,991,918 0 0 0 32,042,481 457,253 0 0 0 0 31,585,228 32,042,481 0 499,872 0 0 529,536 0 0 (29,664) 0 (29,664) 0 0 0 (29,664) 0.00 0.00
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