-----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, PH96/7xNzkj7CGdfBvCoA+ndt1MjtybOh4YI6YJ4CC/g1IxD3ASGaosYWi7Ix+3Y ZYfD4Hp4xv02LwSPc+3xGA== 0000059544-97-000003.txt : 19971104 0000059544-97-000003.hdr.sgml : 19971104 ACCESSION NUMBER: 0000059544-97-000003 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970731 FILED AS OF DATE: 19971103 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: LINCOLN INTERNATIONAL CORP CENTRAL INDEX KEY: 0000059544 STANDARD INDUSTRIAL CLASSIFICATION: TRANSPORTATION SERVICES [4700] IRS NUMBER: 61057092 STATE OF INCORPORATION: KY FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-05767 FILM NUMBER: 97706475 BUSINESS ADDRESS: STREET 1: 120 VILLAGE SQUARE STREET 2: SUITE 6 CITY: LOUISVILLE STATE: KY ZIP: 40243 BUSINESS PHONE: 5022458814 MAIL ADDRESS: STREET 1: 120 VILLAGE SQUARE STREET 2: SUITE 6 CITY: LOUISVILLE STATE: KY ZIP: 40253 10-K 1 FORM 10-K ANNUAL REPORT SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-K Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For fiscal year ended July 31, 1997 Commission File No. 0-5767 LINCOLN INTERNATIONAL CORPORATION (Exact name of registrant as specified in its charter) Kentucky # 61-057092 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) Suite No. 6, 120 Village Square Louisville, Kentucky 40243 Address of principal executive office) (Zip Code) Registrant's telephone number, including area code: (502)245-8814 Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered none none Securities registered pursuant to Section 12(g) of the Act: Common Stock (no-par) voting Title of class 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 State the aggregate market value of the voting stock held by non-affiliates of the Registrant. The aggregate market value shall be computed by reference to the price at which the stock was sold, or the average bid and asked prices of such stock, as of a specified date within 60 days prior to the date of filing. No regular market exists for the stock. Indicate the number of shares outstanding of each of the Registrant's classes of common stock, as of the July 31, 1997. Common (no-par) 1,761,145 DOCUMENTS INCORPORATED BY REFERENCE (1) Annual Report -- 1996-1997 (2) Information Statement -- 1997 Portions of the above Annual Report and Information Statement to be issued are hereby incorporated by reference into Parts II and III. PART I ITEM 1: BUSINESS LINCOLN INTERNATIONAL CORPORATION (LINCOLN), incorporated in 1960, is engaged in the management of agricultural properties BOURBON STOCK YARDS (Bourbon) located in Louisville, Kentucky. BOURBON has been in continuous operation for 162 years and was merged into LINCOLN in 1978. LINCOLN INTERNATIONAL entered into a lease agreement with Kentucky Livestock Exchange, a division of Michigan Livestock Exchange, a Michigan corporation, wherein, LINCOLN leased its stockyards operations consisting of approximately seven acres with the term of the lease being for a period of 10 years beginning on July 15th, 1995, and ending on July 14th, 2005, with provisions for payment of rent based on monthly pre-tax profits with a minimum rent provision of $18,000.00 for the first two years. On October 15, 1996, LINCOLN filed a complaint against the lessees by which it is alleged that there has been a violation of the lease agreement, and LINCOLN sought a restraining order, temporary injunction and compensatory relief which, if not granted, could cause LINCOLN to lose its prime source of income because of the increased competition from the operation of the stockyards by these companies within close proximity of Bourbon's operations. (See Legal Proceedings Part III). Hearings have been held on certain portions of this litigation and other hearings have been set. The lease was amended by agreement and as a partial settlement of litigation between Lincoln International and Kentucky Livestock Exchange. BOURBON is subject to the rules and regulations of and must file (publicly available) reports with, the Interstate Commerce Commission (ICC) and the United States Department of Agriculture (USDA). BOURBON'S disposal of its waste materials is in compliance with federal, state and local environmental laws. EMPLOYEES: As of July 31, 1997, LINCOLN employed three (3) administrative personnel. MAJOR BUSINESS SEGMENTS - FINANCIAL DATA The following is a report of the major business segments and the corresponding financial data. Prior to July 31, 1995, the Company considered its activities to comprise two segments: (1) financial lending and (2) agribusiness. After July 31, 1995, the company operated only an agribusiness. Summary data for 1997, 1996 and 1995 is as follows: 1997 1996 1995 Revenues: Finance $ 0 $ 0 $ 58,625 Agribusiness 290,428 298,272 1,296,663 Other 2,291 3,357 6,884 Consolidated $ 292,719 $301,629 $1,362,172 Operating profit (loss): Finance $ -133 $ -2,925 $-15,243 Agribusiness 139,269 86,314 161,081 Total segments 139,136 83,389 145,838 Corporate and other expenses -292,180 -226,354 -246,312 Loss from operations -153,044 -142,965 -100,474 Nonoperating income 33,065 732,496 123,082 Interest expense -35,138 -80,405 -104,336 Income (loss) before income taxes $-154,577 $509,126 $-81,728 Total assets: Finance $ 0 $ 0 $ 491 Agribusiness 1,078,100 1,127,211 1,283,533 Total segments 1,078,100 1,127,211 1,284,024 Corporate and other 158,702 231,574 339,342 Consolidated $1,236,802 $1,358,785 $1,623,366 Capital expenditures: Finance $ 0 $ 0 $ 0 Agribusiness 5,740 5,000 5,215 Total segments 5,740 5,000 5,215 Corporate and other 0 3,998 695 Consolidated $5,740 $8,998 $5,910 Depreciation and amortization: Finance $ 0 $ 0 $ 286 Agribusiness 41,877 52,853 57,118 Total segments 41,877 52,853 57,404 Corporate and other 3,066 3,181 10,423 Consolidated $44,943 $56,034 $67,827 ITEM 2: Properties The following are the various properties owned or leased by LINCOLN as of July 31, 1997. APPROXIMATE LEASE EXPI- TYPE OF SQUARE FEET RATION DATE LOCATION PROPERTY FLOOR SPACE (RENEWAL OPTIONS) LINCOLN ADMINISTRATIVE OFFICES Louisville, KY Offices 300 sq. ft. 03/01/98 * * * * * * * * * BOURBON STOCK YARDS Louisville, KY Stock yard Owned real estate 20.5 acres & buildings Stock yard offices10,460 ft. 02/1/2001 Louisville, KY Right-of-way NA 1997 (1) for stock yard Louisville, KY Warehouse 4,000.0 ft. Owned Louisville, KY Warehouse 9,000.0 ft. Owned * * * * * * * * * (1) The right-of-way is not essential to Bourbon's operations but does provide an easier access and egress from the facility. * * * * * * * * * The properties listed above are suitable and adequate for the various needs they supply. The total fixed annual rental for all of the above leased facilities (exclusive of taxes and other charges) was $63,585. ITEM 3: Legal Proceedings LINCOLN filed a complaint on October 15, 1996, seeking injunctive and compensatory relief arising from the breach of the lease of the real estate by Kentucky Livestock Exchange and Michigan Livestock Exchange, Inc. and sought relief by way of a Restraining Order and Injunction to prohibit the lessees from engaging in competitive actions of operating stockyard facilities within close proximity of Bourbon Stockyards in Louisville, Kentucky. LINCOLN and Kentucky Livestock Exchange and Michigan Livestock Exchange, Inc. have reached an agreement on amending the lease and although there are other portions of the lawsuit pending, none of the remaining problems will have a material effect upon the operation of LINCOLN or its business interest. Neither LINCOLN nor any of its subsidiaries is engaged in any other material legal proceedings. ITEM 4: Submission of Matters to a Vote of Security Holders The items to be voted on at the annual meeting which will be held on the 5th day of December, 1997, are as follows: (1) Election of directors and (2) Reverse stock split. PART II ITEM 5: Market for Registrant's Common Stock and Related Stockholder Matters (1) There does not exist at the present time any regular market for any common stock of the Registrant. (2) There are approximately 1,370 shareholders of record of the common (no par) stock of LINCOLN. (3) The Registrant has never paid or declared any dividends. (4) The Registrant has filed a Schedule 13E-3 with the Securities and Exchange Commission as a "Tender Offer" wherein it will propose to purchase a maximum of 1,000,000 shares of the (no-par) (non-voting) common stock for a tender price of thirty- five ($.35) cents per share. As a result of the tender offer, there was acquired 910,144 shares. Reference is made to that filing for specific information and is incorporated by reference herein. ITEM 6: Selected Financial Data Years ending July 31 1997 1996 1995 1994 1993 Revenues 292719 301629 1362172 1507258 1497505 Income (loss) before extraordinary items -154577 494735 -87968 -73394 -105336 Net income (loss) -154577 494735 -87968 -73394 -105336 Earnings (loss) per common share: Income (loss) before extraordinary items -.10 .31 -.05 -.04 -.07 Net income (loss) -.10 .31 -.05 -.04 -.07 Cash dividends 0 0 0 0 0 Total assets 1236802 1358785 1623366 1959569 2037796 Long-term obligations 385511 387250 733640 819788 871068 ITEM 7:Management's Discussion and Analysis of Financial Conditions and Results of Operations Agri-Business BOURBON STOCKYARD During July, 1995, Lincoln International Corporation leased the Bourbon Stockyard operations to Michigan Livestock Exchange. Net revenue from leasing the stockyard operations for the fiscal year ended July 31, 1997 was approximately the same as compared to 1996. Operating costs for the year ended July 31, 1997 decreased by approximately $49,000 or 25% as compared to 1996. The decrease resulted from miscellaneous expenses in 1996 associated with the closing of the operations of the stockyard. Net revenue for the fiscal year ended July 31, 1996 decreased approximately $877,800 or 74% as compared to the year ended July 31, 1995. Operating costs for the year ended July 31, 1996 decreased by approximately $807,000 or 80% as compared to the year ended July 31, 1995. The income and expense reductions are the result of leasing the property to Michigan Livestock Exchange. There were no accounts payable or capital commitments at July 31, 1997. All funds in excess of expenses are available to the parent. CONSOLIDATED OPERATIONS Revenues from consolidated operations in 1997 decreased approxi- mately $29,000 or 9% as compared to 1996. There were various miscellaneous items received in 1996 that were nonrecurring. Operating costs from consolidated operations for the year ended July 31, 1997 were down approximately $14,000 from the year ended July 31, 1996. This was due primarily to reduced depreciation for the year. Revenues from consolidated operations in 1996 decreased approximately $1,061,000 or 78% as compared to 1995. This decrease is primarily the result of the lease of the Bourbon Stockyard operation. Operating costs for the year ended July 31, 1996, were down approximately $1,042,000 or 66% as compared to 1995. This decrease is primarily the result of the lease of the Bourbon Stockyard operation. Operating costs, which include amortization and depreciation account for 148%, 174%, and 114% of net sales and operating revenues for the years 1997 to 1995 respectively. There were no capital commitments at July 31, 1997. Working capital at July 31, 1997 was approximately $89,000 as compared to approximately $144,000 at July 31, 1996. There were no defaults on loans payable during the year. The liquidity of the company will depend on the lease arrangements at Bourbon Stockyards and the development of the remaining property owned by the Company. ITEM 8: Consolidated Financial Statements and Supplementary Data The response to this item is contained within a separate section of this report. ITEM 9: Changes in and Disagreements with Accountants None. ITEM 10: NAME, PRINCIPAL OCCUPATION AND OTHER POSITIONS WITH DIRECTORS SHARES OWNED AS OF 07/31/97 LINCOLN FOR LAST 5 YEARS SINCE Thurman L. Sisney, Chairman of the Board, President and CEO Director, Age 51 1994 50,445(1) Richard Dolin Secretary/Treasurer Director, Age 52 1996 910,144(2) David W. Barhorst Director, Age 38 1996 _______ Officers & Directors as a group 960,589 (1) Includes shares held in names of Drivers and Drovers Diversified, Inc., a Kentucky corporation owned by Thurman L. Sisney. (2) Includes shares of LTG, Inc., a Kentucky corporation of which 50% is owned by Mrs. Lee Sisney. Management has no reason to believe that any of the persons so named above will be unable or unavailable to accept nominations but should this occur, votes will be given for such other person or persons, if any, as the Board of Directors may recommend. BUSINESS HISTORY OF DIRECTORS Thurman L. Sisney - Mr. Sisney is President, Chairman of the Board and Chief Executive Officer of Lincoln International Corporation. Mr. Sisney has a masters degree in business administration and law degree from the University of Louisville and has been in private practice since 1980. He has served as general counsel to the Kentucky Finance and Administration Cabinet as well as counsel and legislative liaison to the governor of Kentucky. Mr. Sisney has also served as General Counsel and Deputy Commissioner of Agriculture and the Kentucky Department of Agriculture. Mr. Sisney is very active in civic and charitable organizations in the community including but not limited to the board of trustees of the Louisville Conference of the United Methodist Church, Founder and President of the International Association of Convention and Hospitality and Industry Attorney's Association. Richard Dolin - Mr. Dolin is a graduate of the University of Louisville Law School where he obtained his Juris Doctorate degree, is a graduate of Louisville Presbyterian Theological Seminary where he obtained a certificate of double competency in law and theology and a master degree in Business Administration from Bellarmine College and has done doctoral work in business administration at the University of Kentucky. Mr. Dolin is associate pastor for the Harvey Browne Memorial Presbyterian Church in Louisville, Kentucky, and is responsible for adult education programs and out-reach activities and also serves as president of Nomos, Ltd., which provides consultation to small and medium sized profit and non-profit organizations regarding strategic planning, accounting, budgeting, and related items. Mr. Dolin also was involved in providing seminars on areas of leadership and management skills. Mr. Dolin is involved in many community activities including work for building homes for developmentally disabled adults and is involved in Chinese and American relationships. David W. Barhorst - Mr. Barhorst is a graduate of the University of Kentucky Honors Program having received his Bachelors of Science in Advertising in 1982. Mr. Barhorst is president and founder of Oertel Brewing Company, manufacturer of Oertels 92 Beer. He is also president of Oertel Brewery Complex Incorporated, a real estate management and development company. Mr. Barhorst has been involved in real estate investments and has been a financial consultant to Merrill Lynch, Pierce, Fenner & Smith. Mr. Barhorst is also been involved in all phases of advertising with various radio stations as well as Courier Journal and Louisville Times. ITEM 11: The directors received compensation of Three Hundred ($300.00) Dollars per meeting and travel expenses. The directors fees and travel expense for 1996-1997 was $3,300. ITEM 12 and ITEM 13: LINCOLN intends to file an Information Statement pursuant to Regulation 14(c) which contains all of the information required by Part III which information is incorporated herein by reference. PART IV ITEM 14: Exhibits, Financial Statement Schedules and Reports on Form 8-K Part IV which relates to Item 14 concerning exhibits, financial statement schedules and reports is hereby amended to include the following items by reference. (3) Articles of Incorporation and By-Laws: The articles and by-laws of Lincoln International Corporation were filed as a part of its Form 10 filing in September of 1971. (4) Form 8-K filed September, 1991, reporting sale and disposition of assets of Lincoln Finance Company, Inc. to Kentucky Finance Co., Inc. of three (3) of the four (4) finance companies operated by Registrant. (5) Articles of Merger of majority held subsidiary, Professional Services, Inc., into Registrant as filed on Form 10K for fiscal year 1991-1992. (6) Form 10-K - 1995 (1) A copy of the lease agreement dated July 15, 1995, between LINCOLN INTERNATIONAL CORPORATION and Kentucky Livestock Exchange (BOURBON STOCKYARDS OPERATIONS) a division of Michigan Livestock Exchange, et al. (7) 8-K - 1997 (1) A copy of the amendment to the Articles of Incorporation eliminating classes of stock. Financial data and schedules are submitted separately as a separate schedule and are attached hereto. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Lincoln International Corporation has duly caused this report to be signed on its behalf, by the undersigned, President and Chief Executive Officer, Thurman L. Sisney, and by its principal Financial Officer and principal Accounting Officer, Secretary and Treasurer, Richard Dolin, as thereunto duly authorized in the City of Louisville, Commonwealth of Kentucky, on the 29th day of October, 1997. LINCOLN INTERNATIONAL CORPORATION ____________________________ By: Thurman L. Sisney, President Date: ____________________________ ___________________________ By: Richard Dolin, Sec./Treas. Date: ___________________________ Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of LINCOLN INTERNATIONAL CORPORATION in the capacities and on the date indicated. SIGNATURE TITLE (1) Principal Executive Officers ______________________________ Thurman L. Sisney President & Chairman of the Board ______________________________ Richard Dolin Secretary/Treasurer (2) Directors _____________________________ Thurman L. Sisney Director _____________________________ Richard Dolin Director _____________________________ David N. Barhorst Director LINCOLN INTERNATIONAL CORPORATION ANNUAL REPORT FORM 10-K INDEPENDENT AUDITOR'S REPORT The Board of Directors and Stockholders Lincoln International Corporation Louisville, Kentucky We have audited the consolidated balance sheets of Lincoln International Corporation listed in the accompanying index to Financial Statements (Item 14(a)) as of July 31, 1997 and 1996, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended July 31, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements listed in the accompanying Index to Financial Statements (Item 14(a)) present fairly, in all material respects, the consolidated financial position of Lincoln International Corporation as of July 31, 1997 and 1996, and the consolidated results of its operations and its cash flows for each of the three years in the period ended July 31, 1997, in conformity with generally accepted accounting principles. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 4 to the financial statements, there is substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. POTTER & COMPANY, LLP Louisville, Kentucky September 10, 1997 LINCOLN INTERNATIONAL CORPORATION Index to Financial Statements Item 14(a) The following consolidated financial statements of Lincoln International Corporation and subsidiaries are incorporated by reference in Item 8: Consolidated balance sheets - July 31, 1997 and 1996 Consolidated statements of operations - years ended July 31, 1997, 1996, and 1995 Consolidated statements of stockholders' equity - years ended July 31, 1997, 1996, and 1995 Consolidated statements of cash flows - years ended July 31, 1997, 1996, and 1995 Notes to consolidated financial statements Supporting schedules for the three years ended July 31, 1997, 1996, and 1995: I - Condensed financial information (parent company only) II - Valuation and qualifying accounts and reserves All other schedules are omitted since the required information is not present or is not present in amounts sufficient to require submission of the schedule, or because the information required is included in the consolidated financial statements and notes thereto. SCHEDULE I LINCOLN INTERNATIONAL CORPORATION (PARENT COMPANY ONLY) CONDENSED BALANCE SHEETS July 31, 1997 and 1996 1997 1996 A S S E T S Current assets: Cash and cash equivalents $ 156,141 $ 224,743 Accounts receivable, net 9,732 12,409 Total current assets 165,873 237,152 Investments in subsidiaries 575,000 1,140,750 Net property, plant and equipment 1,070,929 1,121,633 Total assets $1,811,802 $2,499,535 L I A B I L I T I E S A N D S T O C K H O L D E R S' E Q U I T Y Current liabilities: Current maturities of long-term debt $ 5,443 $ 9,256 Accounts payable 28,594 11,085 Income taxes payable 0 14,366 Accrued expenses 42,968 57,940 Total current liabilities 77,005 92,647 Long-term debt, less current maturities 385,511 387,250 Advances from subsidiaries 582,921 583,170 Stockholders' equity: Common stock 1,300,019 1,250,019 Retained earnings (deficit) -533,654 186,449 Total stockholders' equity 766,365 1,436,468 Total liabilities and stockholders' equity $1,811,802 $2,499,535 See accompanying notes. SCHEDULE I LINCOLN INTERNATIONAL CORPORATION (PARENT COMPANY ONLY) CONDENSED STATEMENTS OF OPERATIONS Years ended July 31, 1997, 1996, and 1995 1997 1996 1995 Revenues: Net service and operating revenues $ 292,719 $300,199$1,194,763 Net product sales 0 0 119,689 Gain (loss) on sale of assets 24,999 715,210 -28,501 Miscellaneous income 8,606 570,834 26,223 326,324 1,586,243 1,312,174 Costs and expenses: Cost of service and operating revenues 220,156 230,009 914,457 Cost of products sold 0 0 104,169 Operating, general and administrative expenses 225,383 211,365 383,117 Interest expense - subsidiaries 0 0 19,399 Interest expense - other 35,138 70,932 104,336 480,677 512,306 1,525,478 Income (loss) before provision for income tax -154,353 1,073,937 -213,304 Income tax 0 14,366 0 Income (loss) before equity in net earnings (losses) of subsidiaries -154,353 1,059,571 -213,304 Equity in net earnings (losses) of subsidiaries -224 -7,232 125,336 Net income (loss) $-154,577 $1,052,339 $-87,968 See accompanying notes. SCHEDULE I LINCOLN INTERNATIONAL CORPORATION (PARENT COMPANY ONLY) CONDENSED STATEMENTS OF CASH FLOWS Years ended July 31, 1997, 1996, and 1995 1997 1996 1995 Cash flows from operating activities: Net income (loss) $-154,577$1,052,339 $-87,968 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 44,943 56,034 67,541 Equity in net (earnings) losses of consolidated subsidiaries 224 7,232 -125,336 (Gain) loss on sale of property, equipment, and operating assets -24,999 -715,210 28,501 Stock bonus 50,000 0 0 Provision for losses on other receivables 20,550 19,032 0 Change in assets and liabilities: Increase in accounts receivables -17,873 -10,190 -8,011 Decrease in inventories 0 0 681 Decrease in other current assets 0 7,091 3,963 Increase (decrease) in accounts payable 17,509 -49,285 -33,306 Decrease in accrued expenses -14,972 -25,892 -744 Increase (decrease) in income taxes payable -14,366 14,366 0 Net cash provided by (used in) operating activities -93,561 355,517 -154,679 Cash flows from investing activities: Proceeds from disposal of property, equipment, and operating assets 36,500 807,426 24,440 Purchases of property and equipment -5,740 -8,998 -5,910 Net cash provided by investing activities 30,760 798,428 18,530 Cash flows from financing activities: Net repayments under short-term notes payable 0 0 -90,379 Increase (decrease) in advances from subsidiaries -249 -729,387 649,259 Proceeds from long-term debt 0 757 1,389 Principal payments on long-term debt -5,552 505,449 -103,963 Purchase of common stock for the treasury 0 -26,570 0 Net cash provided by (used in) financing activities -5,801-1,260,649 456,306 Net increase (decrease) in cash and cash equivalents -68,602 -106,704 320,157 Cash and cash equivalents at beginning of year 224,743 331,447 11,290 Cash and cash equivalents at end of year $156,141 $224,743 $331,447 See accompanying notes. SCHEDULE I LINCOLN INTERNATIONAL CORPORATION (PARENT COMPANY ONLY) CONDENSED STATEMENTS OF CASH FLOWS - CONTINUED Years ended July 31, 1997, 1996, and 1995 1997 1996 1995 Supplemental disclosures of cash flow information: Cash paid during the year for interest $36,121 $73,164 $123,629 Cash paid during the year for income taxes $14,366 $0 $0 Supplemental schedule of noncash financing activities: Issuance of common stock for executive bonus $50,000 $0 $0 See accompanying notes. SCHEDULE I LINCOLN INTERNATIONAL CORPORATION (PARENT COMPANY ONLY) NOTES TO CONDENSED FINANCIAL STATEMENTS July 31, 1997 and 1996 1. Basis of Presentation In accordance with the requirements of Regulation S-X of the Securities and Exchange Commission, the financial statements of the registrant are condensed and omit many disclosures presented in the consolidated financial statements and the notes thereto. 2. Long-term debt Long-term debt consists of the following: 1997 1996 Mortgage note payable, interest at 8.75%, monthly payments of $3,283 including principal and interest, balloon payment due February 2001, secured by real property. Prior to October 1, 1996, interest was at 9.875% and monthly payments of principal and interest were $4,000. $390,954 $396,506 Less current maturities 5,443 9,256 Totals $385,511 $387,250 Scheduled maturities of long-term debt during the five years subsequent to July 31, 1997 are as follows: 1998 $ 5,443 1999 5,895 2000 6,432 2001 373,184 Total $ 390,954 3. Dividends Cash dividends paid to Lincoln International Corporation by its consolidated subsidiaries were $0, $557,605, and $0 for the fiscal years ended July 31, 1997, 1996 and 1995, respectively. The amounts are included in miscellaneous income. SCHEDULE I LINCOLN INTERNATIONAL CORPORATION (PARENT COMPANY ONLY) NOTES TO CONDENSED FINANCIAL STATEMENTS July 31, 1997 and 1996 4. Going Concern As shown in the accompanying financial statements, the Company incurred a net loss of $154,577 during the year ended July 31, 1997. The ability of the Company to continue as a going concern is dependent upon future profitable operations. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. SCHEDULE II LINCOLN INTERNATIONAL CORPORATION AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS AND RESERVES Years ended July 31, 1997, 1996, and 1995 Column Column Column Column Column A B C D E Additions Balance Charged Charged Balance at to to Other at Beginning Costs & Accounts Deductions End Description of Year Expenses Describe Describe of Year Year ended July 31, 1997 Reserves deducted from assets: Allowance for losses: Accounts receivable 19,782 20,550 0 0 40,332 Loans receivable - finance 0 0 0 0 0 19,782 20,550 0 0 40,332 Accumulated amortization - Franchise license 0 0 0 0 0 19,782 20,550 0 0 40,332 Year ended July 31, 1996 Reserves deducted from assets: Allowance for losses: Accounts receivable 750 19,032 0 0 19,785 Loans receivable - finance 0 0 0 0 0 750 19,032 0 0 19,785 Accumulated amortization - Franchise license 0 0 0 0 0 750 19,032 0 0 19,785 Year ended July 31, 1995 Reserves deducted from assets: Allowance for losses: Accounts receivable 4,081 0 0 3,331 A 750 Loans receivable - finance16,515 7,435 0 23,950 A,B 0 20,596 7,435 0 27,281 750 Accumulated amortization - Franchise license 75,529 6,294 0 81,823 C 0 96,125 13,729 0109,104 750 (A) Write-off of doubtful accounts. (B) Includes reduction in allowance in the amount of $16,807 due to sale of finance receivables. (C) Sold Franchise license May 1, 1995. LINCOLN INTERNATIONAL CORPORATION CONSOLIDATED FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR'S REPORT July 31, 1997, 1996, and 1995 INDEPENDENT AUDITOR'S REPORT To the Board of Directors and Stockholders Lincoln International Corporation Louisville, Kentucky We have audited the accompanying consolidated balance sheets of Lincoln International Corporation as of July 31, 1997 and 1996, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended July 31, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Lincoln International Corporation as of July 31, 1997 and 1996, and the consolidated results of its operations and its cash flows for each of the three years in the period ended July 31, 1997, in conformity with generally accepted accounting principles. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 13 to the financial statements, there is substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. POTTER & COMPANY, LLP September 10, 1997 LINCOLN INTERNATIONAL CORPORATION CONSOLIDATED BALANCE SHEETS July 31, 1997 and 1996 A S S E T S 1997 1996 Current assets: Cash and cash equivalents $ 156,141$ 224,743 Other receivables 9,732 12,409 Total current assets 165,873 237,152 Net property, plant and equipment 1,070,929 1,121,633 Total assets $1,236,802$1,358,785 L I A B I L I T I E S Current liabilities: Current maturities of long-term debt $ 5,443$ 9,256 Accounts payable 28,594 11,085 Income taxes payable 0 14,391 Accrued expenses 42,968 57,940 Total current liabilities 77,005 92,672 Long-term debt, less current maturities385,511 387,250 Total liabilities 462,516 479,922 Commitments S T O C K H O L D E R S' E Q U I T Y Stockholders' equity: Common stock, no par value, (3,000,000 shares authorized; 1,761,145 and 1,561,145 shares issued and outstanding in 1997 and 1996, respectively) 1,300,019 1,250,019 Retained earnings (deficit) -525,733 -371,156 Total stockholders' equity 774,286 878,863 Total liabilities and stockholders' equity $1,236,802$1,358,785 See accompanying notes. 2 LINCOLN INTERNATIONAL CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS Years ended July 31, 1997, 1996, and 1995 1997 1996 1995 Revenues: Net service and operating revenues $292,719 $301,629$1,183,858 Net product sales 0 0 119,689 Finance charges and other income earned on finance receivables 0 0 58,625 Total revenues 292,719 301,6291,362,172 Costs and expenses: Cost of service and operating revenues220,156 230,009 931,305 Cost of products sold 0 0 104,169 Operating, general and administrative expenses 225,607 214,585 401,660 Provision for credit losses on finance receivables 0 0 6,409 Interest expense related to finance subsidiary 0 0 19,103 Total costs and expenses 445,763 444,5941,462,646 Loss from operations -153,044 -142,965 -100,474 Other income (expense): Gain on sale of property, equipment, and operating assets 24,999 715,210 88,640 Interest expense -35,138 -80,405 -104,336 Miscellaneous income 8,606 17,286 34,442 Total other income (expense) -1,533 652,091 18,746 Income (loss) before income taxes-154,577 509,126 -81,728 Provision for income taxes 0 14,391 6,240 Net income (loss) $-154,577 $494,735 $-87,968 Net income (loss) per common share $-.10 $.31 $-.05 See accompanying notes. 3 LINCOLN INTERNATIONAL CORPORATION CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY Years ended July 31, 1997, 1996, and 1995 Total Common CommonAdditional Retained Stock- Stock Stock Paid-in Earnings holders' Voting Nonvoting Capital (Deficit) Equity Balance at July 31, 1994 $50,000 $761,537 $465,052 $-777,923 $498,666 Net loss 0 0 0 -87,968 -87,968 Balance at July 31, 1995 50,000 761,537 465,052 -865,891 410,698 Purchase of 61,929 shares of common stock for the treasury 0 -30,964 4,394 0 -26,570 Net income 0 0 0 494,735 494,735 Balance at July 31, 1996 $50,000 $730,573 $469,446 $-371,156 $878,863 Issuance of 200,000 shares of common stock for executive bonus 0 50,000 0 0 50,000 Exchange to a single class of stock, no par value 1,250,019 -780,573 -469,446 0 0 Net loss 0 0 0 -154,577 -154,577 Balance at July 31, 1997$1,300,019 $0 $0 $-525,733 $774,286 See accompanying notes. 4 LINCOLN INTERNATIONAL CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS Years ended July 31, 1997, 1996, and 1995 1997 1996 1995 Cash flows from operating activities: Net income (loss) $-154,577$494,735 $-87,968 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 44,943 56,034 67,827 Provision for credit losses on finance receivables 0 0 7,435 Provision for losses on other receivables 20,550 19,032 0 Reduction in allowance for credit losses due to sale of operating assets 0 0 -16,807 Gain on sale of property, equipment, and operating assets-24,999-715,210 -88,640 Stock bonus 50,000 0 0 Change in assets and liabilities: Increase in other receivables -17,873 -8,733 -7,976 Decrease in inventories 0 0 681 Decrease in prepaid expenses 0 7,091 4,082 Increase (decrease) in accounts payable 17,509 -49,285 -33,340 Increase (decrease) in income taxes payable -14,391 8,151 1,842 Decrease in accrued expenses -14,972 -35,669 -4,520 Decrease in deferred insurance commissions 0 0 -2,435 Net cash used in operating activities -93,810-223,854 -159,819 Cash flows from investing activities: Loans originated 0 0 -146,251 Loans repaid 0 0 146,565 Proceeds from sale of loans 0 0 661,951 Proceeds from disposal of property, equipment and operating assets 36,500 807,426 24,690 Purchases of property and equipment -5,740 -8,998 -5,910 Net cash provided by investing activities 30,760 798,428 681,045 See accompanying notes. 5 LINCOLN INTERNATIONAL CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS Years ended July 31, 1997, 1996, and 1995 1997 1996 1995 Cash flows from financing activities: Net repayments of short-term notes $ 0$ 0 $-90,379 Proceeds from long-term debt 0 757 1,389 Principal payments on long-term debt -5,552-656,700 -120,792 Purchase of common stock for the treasury 0 -26,570 0 Net cash used in financing activities -5,552-682,513 -209,782 Net increase (decrease) in cash and cash equivalents -68,602-107,939 311,444 Cash and cash equivalents at beginning of year 224,743 332,682 21,238 Cash and cash equivalents at end of year $156,141$224,743 $332,682 Supplemental disclosures of cash flow information: Cash paid during the year for interest $36,121 $84,924 $124,588 Cash paid during the year for income taxes $14,366 $6,240 $4,398 Supplemental schedule of noncash financing activities: Issuance of common stock for executive bonus $50,000 $0 $0 See accompanying notes. 6 LINCOLN INTERNATIONAL CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS July 31, 1997, 1996, and 1995 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This summary of significant accounting policies of Lincoln International Corporation (the Company) is presented to assist in understanding the Company's financial statements. The financial statements and notes are representations of the Company's management who is responsible for their integrity and objectivity. These accounting policies conform to generally accepted accounting principles and have been consistently applied in the preparation of the financial statements. Company's Activities: Lincoln International Corporation owns property in the state of Kentucky which is leased to a stock yard operator. The Company operated the stock yard through July 15, 1995. Through April 30, 1995, the Company engaged in the operation of ice cream franchises in the Midwestern United States. On May 1, 1995, the Company sold its remaining territories and equipment of the ice cream operation. Through November 30, 1994, the Company engaged in the operation of a small consumer loan company in the state of Kentucky. On December 1, 1994, the Company sold all finance receivables and ceased operations at its one remaining small consumer loan company. Use of Estimates: Management uses estimates and assumptions in preparing financial statements. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported revenues and expenses. Principles of Consolidation: The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany transactions are eliminated in consolidation. Cash and Cash Equivalents: For purposes of reporting cash flows, the Company considers all money market funds with a maturity of three months or less to be cash equivalents. Finance Receivables: All new direct cash loans of the Company have been recorded on the discount- basis. Income from discount-basis direct cash loans and retail contracts is 7 LINCOLN INTERNATIONAL CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS July 31, 1997, 1996, and 1995 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) calculated using a method which approximates the interest method. Accrual of interest income is suspended when a loan is contractually delinquent for ninety days or more at which time the loan is converted to interest-bearing. Income from interest-bearing loans is credited to income as and when collections are made. Extension fees and late charges on discount-basis direct cash loans and retail contracts are credited to income when collected. Insurance commissions are recognized over the terms of the related loans based on the straight-line method which approximates the interest method. During the year ended July 31, 1995, the Company sold all finance receivables and ceased operations as a small consumer loan company. Property, Plant and Equipment: Property, plant and equipment are recorded at cost. Depreciation is provided over the following estimated useful lives: Buildings and improvements 20-40 years Yard and administration building 10-55 years Leasehold improvements 3-5 years Machinery and equipment 3-12 years The Company uses the straight-line method of computing depreciation for financial statement purposes and accelerated methods for income tax purposes. Leasehold improvements are amortized using the straight-line method over the lease term. Income Taxes: The Company files a consolidated federal income tax return. Investment tax credits are treated as a reduction of the tax provision in the year in which the benefit is earned (flow-through method). Separate state income tax returns are filed for the Company and each subsidiary. Earnings Per Share: Earnings per share are based on the weighted average number of shares outstanding during each year. 8 LINCOLN INTERNATIONAL CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS July 31, 1997, 1996, and 1995 NOTE 2 - FINANCE RECEIVABLES Changes in the allowance for credit losses were as follows: Balance as of July 31, 1994 $16,515 Provision for credit losses 7,435 Loans charged off -24,977 Recoveries 1,027 Balance as of July 31, 1995 $ 0 On December 1, 1994, the finance receivables were sold. NOTE 3 - OTHER RECEIVABLES Other receivables consist of the following: 1997 1996 Accounts receivable $50,064 $32,191 Less allowance for doubtful accounts 40,332 19,782 Totals $ 9,732 $12,409 NOTE 4 - PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment consists of the following: 1997 1996 Land $ 667,504 $ 667,504 Building and improvements 68,250 68,250 Yard and administration building 2,133,365 2,149,593 Machinery and equipment 226,346 331,330 Leasehold improvements 2,800 2,800 3,098,265 3,219,477 Less accumulated depreciation 2,027,336 2,097,844 Net property, plant and equipment $1,070,929 $1,121,633 Depreciation expense for the years ended July 31, 1997, 1996 and 1995 was $44,943, $56,034 and $61,533, respectively. 9 LINCOLN INTERNATIONAL CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS July 31, 1997, 1996, and 1995 NOTE 5 - LONG-TERM DEBT Long-term debt consists of the following: 1997 1996 Mortgage note payable, interest at 8.75%, monthly payments of $3,283, including principal and interest, balloon payment due February 2001, secured by real property. Prior to October 1, 1996, interest was at 9.875% and monthly payments of principal and interest were $4,000. $390,954 $396,506 Less current maturities 5,443 9,256 Totals $385,511 $387,250 Aggregate maturities required on long-term debt at July 31, 1997 are as follows: 1998 $ 5,443 1999 5,895 2000 6,432 2001 373,184 Total $390,954 NOTE 6 - INCOME TAXES The provision for income taxes consists of the following: 1997 1996 1995 Federal income taxes $ 0 $ 2,310 $ 0 State and local income taxes 0 12,081 6,240 Provision for income taxes $ 0 $14,391 $6,240 10 LINCOLN INTERNATIONAL CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS July 31, 1997, 1996, and 1995 NOTE 6 - INCOME TAXES (CONTINUED) The Company has available at July 31, 1997 unused tax credits and operating loss carryforwards, which may provide future tax benefits. If not used, the carryforwards will expire as follows: Year of Tax Operating Loss Expiration Credits Carryforwards 2001 $61,247 $ 0 2002 0 0 2003 0 0 2004 0 0 2005 0 60,774 2006 0 216,677 2007 0 0 2008 0 89,623 2009 0 76,331 2010 0 59,836 2011 0 106,248 Total $61,247 $609,489 11 LINCOLN INTERNATIONAL CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS July 31, 1997, 1996, and 1995 NOTE 6 - INCOME TAXES (CONTINUED) The difference between the statutory income tax rate and the Company's effective tax rate is reconciled as follows: 1997 1996 1995 Amount PercentAmount Percent Amount Percent Federal taxes (benefit) at statutory rate $0 0%$173,100 34.0%$-27,800 -34.0% Surtax exemption 0 0% 0 .0% 0 0.0% Tax effect of current operating loss available for carryover 0 0% 0 0.0% 27,800 34.0% Benefit due to operating loss carryforward 0 0%-158,323 -31.1% 0 0.0% Temporary differences 0 0%-11,770 -2.3% -851 -1.0% State and local income taxes, net of federal benefit 0 0% 11,384 2.2% 7,091 8.6% $0 0%$14,391 2.8% $6,240 7.6% A deferred tax asset due to the operating loss and tax credit carryforwards has not been recognized because it is more likely than not that it will not be realized based on current circumstances. 12 LINCOLN INTERNATIONAL CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS July 31, 1997, 1996, and 1995 NOTE 7 - MAJOR BUSINESS SEGMENTS The Company considers its activities to comprise two reportable segments: financial lending and agribusiness. Summary data is as follows: 1997 1996 1995 Revenues: Finance $ 0 $ 0 $ 58,625 Agribusiness 290,428 298,272 1,296,663 Other 2,291 3,357 6,884 Consolidated $ 292,719 $301,629 $1,362,172 Operating profit (loss): Finance $ -133 $ -2,925 $-15,243 Agribusiness 139,269 86,314 161,081 Total segments 139,136 83,389 145,838 Corporate and other expenses -292,180 -226,354 -246,312 Loss from operations -153,044 -142,965 -100,474 Nonoperating income 33,065 732,496 123,082 Interest expense -35,138 -80,405 -104,336 Income (loss) before income taxes $-154,577 $509,126 $-81,728 Total assets: Finance $ 0 $ 0 $ 491 Agribusiness 1,078,100 1,127,211 1,283,533 Total segments 1,078,100 1,127,211 1,284,024 Corporate and other 158,702 231,574 339,342 Consolidated $1,236,802 $1,358,785 $1,623,366 Capital expenditures: Finance $ 0 $ 0 $ 0 Agribusiness 5,740 5,000 5,215 Total segments 5,740 5,000 5,215 Corporate and other 0 3,998 695 Consolidated $5,740 $8,998 $5,910 13 LINCOLN INTERNATIONAL CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS July 31, 1997, 1996, and 1995 NOTE 7 - MAJOR BUSINESS SEGMENTS (CONTINUED) Depreciation and amortization: Finance $ 0 $ 0 $ 286 Agribusiness 41,877 52,853 57,118 Total segments 41,877 52,853 57,404 Corporate and other 3,066 3,181 10,423 Consolidated $44,943 $56,034 $67,827 NOTE 8 - SALE OF OPERATING ASSETS On December 1, 1994, the Company sold all finance receivables and ceased operations at its one remaining branch of Lincoln Finance Company, Inc., in Greensburg, Kentucky. Net finance receivables of $559,858 were sold along with office equipment with a net book value of $1,839 at a gain of $117,060. The building in Greensburg, Kentucky was sold on July 6, 1995, at a gain of $8,756 in a separate transaction. On May 1, 1995, a division of the Company, Linco Marketing sold the remaining territories and equipment of the Ice Cream Churn Franchises for $5,000, at a loss of $36,285. NOTE 9 - LEASE COMMITMENTS The Company and its subsidiaries lease facilities and equipment under written operating leases. Total rental expense amounted to $74,765 in 1997, $51,483 in 1996, and $35,711 in 1995. Future minimum rentals at July 31, 1997 are as follows: Year ending July 31: 1998 $ 54,457 1999 54,457 2000 50,878 2001 25,699 Totals $185,491 14 LINCOLN INTERNATIONAL CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS July 31, 1997, 1996, and 1995 NOTE 10 - LEASE OF PROPERTY On July 15, 1995, the Company leased the property associated with the operation of its stock yard to another stock yard operator. Under the agreement, the Company will receive rent of $18,000 a month. The agreement expires July 31, 2005, but may be terminated by the company upon six months notice to the lessee. The lessee is responsible at its expense, for most repairs, insurance, utilities and property taxes associated with the property. NOTE 11 - LEASE OF PROPERTY, PLANT AND EQUIPMENT The company is the lessor of property under operating leases. Following is a summary of the Company's investment in property, plant and equipment on operating leases as of July 31, 1997: Land $ 667,504 Buildings and Improvements 68,250 Yard building 2,133,365 2,869,119 Less accumulated depreciation 1,834,261 $1,034,858 Under the operating method of accounting for leases, the cost of the property, plant and equipment is recorded as an asset and is depreciated over its estimated useful life and the rental income is recognized as the lease rental payments are earned. All of the leases, except for the lease described in Note 10, are month-to- month. The minimum future rentals to be received on that lease at July 31, 1997 are as follows: Year ending July 31: 1998 $ 216,000 1999 216,000 2000 216,000 2001 216,000 2002 216,000 Thereafter 648,000 $1,728,000 15 LINCOLN INTERNATIONAL CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS July 31, 1997, 1996, and 1995 NOTE 12 - ECONOMIC DEPENDENCY For the year ended July 31, 1997, the Company received approximately 73.4% of its operating revenues from the lessee of the stock yard. The amount of $216,000 was recognized as revenue and received during the year. NOTE 13 - GOING CONCERN As shown in the accompanying financial statements, the Company incurred at net loss of $154,577 during the year ended July 31, 1997. The ability of the Company to continue as a going concern is dependent upon future profitable operations. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. NOTE 14 - CAPITAL STOCK During the year ending July 31, 1997 the company amended the articles of incorporation and resolved that the corporate capital structure consist of 3,000,000 shares of class A common voting stock, all of no par value. This replaces 100,000 shares of voting common stock and 2,900,000 shares of nonvoting common stock, each with $.50 stated value. 16 EX-27 2
5 YEAR JUL-31-1997 AUG-01-1996 JUL-31-1997 156141 0 50064 40332 0 165873 3098265 2027336 1236802 77005 385511 1300019 0 0 (525733) 1236802 0 326324 0 425213 0 20550 35138 (154577) 0 (154577) 0 0 0 (154577) (.10) (.10)
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