-----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, IbBp4WKlrbk4en8jc7ig8VbkxZmuJUNQ3tAHbHczXJ1gqeK5muIPdYQq/nxAw7Hu hF6er/wjfMB1bbQa/Sz/1Q== 0000083402-96-000020.txt : 19960515 0000083402-96-000020.hdr.sgml : 19960515 ACCESSION NUMBER: 0000083402-96-000020 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960514 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: RESOURCE AMERICA INC CENTRAL INDEX KEY: 0000083402 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 720654145 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-04408 FILM NUMBER: 96563843 BUSINESS ADDRESS: STREET 1: 1521 LOCUST STREET CITY: PHILADELPHIA STATE: PA ZIP: 19102 BUSINESS PHONE: 2155465005 MAIL ADDRESS: STREET 1: 2876 SOUTH ARLINGTON ROAD CITY: AKRON STATE: OH ZIP: 44312 FORMER COMPANY: FORMER CONFORMED NAME: RESOURCE EXPLORATION INC DATE OF NAME CHANGE: 19890214 FORMER COMPANY: FORMER CONFORMED NAME: SMTR CORP DATE OF NAME CHANGE: 19700522 10QSB 1 U.S. Securities and Exchange Commission Washington, D.C. 20549 Form 10-QSB (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1996 ------------------------- [ ] 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 0-4408 ----------------------- RESOURCE AMERICA, INC. ----------------------------------------- (Exact name of small business issuer as specified in its charter) Delaware 72-0654145 - -------------------------- ------------------------ (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 1521 Locust Street, Philadelphia, Pennsylvania 19102 ------------------------------------------------------- (Address of principal executive offices) (215) 546-5005 ---------------------- (Issuer's telephone number) ------------------------------------------------------ (Former name, former address, and former fiscal year, if changed since last report) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 CORPORATE ISSUERS State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 757,850 --------------------- RESOURCE AMERICA, INC. INDEX PAGE NUMBER ------ PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheet (Unaudited) March 31, 1996, and September 30, 1995 1 & 2 Consolidated Statement of Income (Unaudited) - Three Months Ended March 31, 1996, and 1995 3 Consolidated Statement of Cash Flows (Unaudited) - Three Months Ended March 31, 1996, and 1995 4 Notes to Consolidated Financial Statements (Unaudited) 5 - 10 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 11 - 13 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 14 PART I. FINANCIAL INFORMATION CONSOLIDATED BALANCE SHEET (UNAUDITED) RESOURCE AMERICA, INC., AND SUBSIDIARIES March 31, 1996, and September 30, 1995 =============================================================================
March 31, September 30, 1996 1995 ASSETS ------------ ------------- Current Assets Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . $ 2,377,014 $ 2,457,432 Accounts and notes receivable . . . . . . . . . . . . . . . . . . . 1,797,952 1,303,556 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117,868 128,488 Prepaid expenses and other current assets . . . . . . . . . . . . . 416,528 34,557 ------------ ------------- Total Current Assets . . . . . . . . . . . . . . . . 4,709,362 3,924,033 Property and Equipment Oil and gas properties and equipment (successful efforts). . . . . . . . . . . . . . . . . . . . . . . 24,062,632 24,039,762 Gas gathering and transmission facilities . . . . . . . . . . . . . 1,520,642 1,514,127 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,150,679 1,072,243 ------------ ------------- 26,733,953 26,626,132 Less - accumulated depreciation, depletion, and amortization. . . . . . . . . . . . . . . . . . . . . . . . . (14,444,407) (14,043,455) ------------ ------------- Net Property and Equipment . . . . . . . . . . . . . . . . . . 12,289,546 12,582,677 Investments in Real Estate Loans . . . . . . . . . . . . . . . . . . . . . . 20,971,859 17,991,415 Restricted Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 994,410 904,409 Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,034,791 2,147,430 ------------ ------------- 40,999,968 37,549,964 ============ =============
The accompanying notes are an integral part of these financial statements. 1 CONSOLIDATED BALANCE SHEET (UNAUDITED) RESOURCE AMERICA, INC., AND SUBSIDIARIES March 31, 1996, and September 30, 1995 =============================================================================
March 31, September 30, 1996 1995 -------------- ------------------ LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable - trade. . . . . . . . . . . . . . . . . . . . . . $ 366,853 $ 721,673 Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . 539,857 516,066 Accrued income taxes. . . . . . . . . . . . . . . . . . . . . . . . - - Current portion of long-term debt . . . . . . . . . . . . . . . . . 92,000 91,000 -------------- ------------------ Total Current Liabilities. . . . . . . . . . . . . . 998,710 1,328,739 Long-term Debt . . . . . . . . . . . . . . . . . . . . . . . . . . 8,483,058 8,522,682 Deferred Income Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,064,000 1,147,000 Commitments and Contingencies Stockholders' Equity Preferred stock, $1.00 par value, 1,000,000 authorized, none issued . . . . . . . . . . . . . . . . . . . . . - - Common stock, $.01 par value, 3,500,000 authorized shares, 2,046,546 and 665,212 issued and outstanding shares (including 153,219 and 152,700 treasury shares) at March 31, 1996, and September 30, 1995, respectively. . . . . . . . . . . . . . . . . . . . . . . . . . . 20,465 8,179 Additional paid-in capital. . . . . . . . . . . . . . . . . . . . . 21,746,629 19,214,210 Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . 10,871,721 10,532,719 Less cost of treasury shares. . . . . . . . . . . . . . . . . . . . (2,734,633) (2,721,437) Less loan receivable from ESOP. . . . . . . . . . . . . . . . . . . (449,982) (482,128) --------------- --------------- Total Stockholders' Equity . . . . . . . . . . . . . 29,454,200 26,551,543 --------------- --------------- $ 40,999,968 $ 37,549,964 =============== ===============
The accompanying notes are an integral part of these financial statements. 2 CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED) RESOURCE AMERICA, INC., AND SUBSIDIARIES Three Months and Six Months Ended March 31, 1996, and 1995 =============================================================================
Three Months Six Months Ended March 31, Ended March 31, ---------------------------------- ---------------------------------- 1996 1995 1996 1995 --------------- -------------- -------------- -------------- Revenues Real estate finance. . . . . . . . . . . . . $ 1,866,202 $ 1,768,868 $ 3,951,323 $ 2,456,649 Equipment leasing. . . . . . . . . . . . . . 1,352,878 - 2,659,411 - Energy : production. . . . . . . . . . . . 769,793 820,390 1,591,784 1,661,646 : services. . . . . . . . . . . . . 486,298 457,015 969,916 952,282 Interest . . . . . . . . . . . . . . . . . . 34,493 57,332 105,702 92,906 --------------- -------------- -------------- -------------- 4,509,664 3,103,605 9,278,136 5,163,483 Costs and Expenses Energy : exploration and production . . . 363,437 418,816 735,849 844,675 : services. . . . . . . . . . . . . 252,543 256,171 494,494 525,623 Real estate finance. . . . . . . . . . . . . 163,212 203,715 303,168 358,626 Equipment leasing. . . . . . . . . . . . . . 478,929 - 1,166,260 - General and administrative . . . . . . . . . 550,879 773,327 1,004,721 1,186,551 Depreciation and amortization. . . . . . . . 298,907 337,424 708,765 680,049 Interest . . . . . . . . . . . . . . . . . . 214,159 319,536 428,725 539,626 Other - net. . . . . . . . . . . . . . . . . 3,231 182 1,152 (511) --------------- -------------- -------------- -------------- 2,325,297 2,309,171 4,843,134 4,134,639 --------------- -------------- -------------- -------------- Income from operations . . . . . . . . . . . 2,184,367 794,434 4,435,002 1,028,844 Other Income (Expense) Gain (loss) on sale of property. . . . . . . 4,738 (2,291) 5,165 (1,458) --------------- -------------- -------------- -------------- Income before income taxes . . . . . . . . . . . . 2,189,105 792,143 4,440,167 1,027,386 Provision for income taxes . . . . . . . . . . . . 634,000 119,000 1,287,000 154,000 --------------- -------------- -------------- -------------- Net income . . . . . . . . . . . . . . . . . $ 1,555,105 $ 673,143 $ 3,153,167 $ 873,386 =============== ============== ============== ============== Net Income per Common Share. . . . . . . . . . . . $ .62 $ .32 $ 1.28 $ .42 =============== ============== ============== ============== Weighted average common shares outstanding. . . . . . . . . . . . . . . . . . . . 2,518,400 2,140,500 2,472,900 2,088,000 =============== ============== ============== ==============
The accompanying notes are an integral part of these financial statements. 3 CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) RESOURCE AMERICA, INC., AND SUBSIDIARIES Six Months Ended March 31, 1996, and 1995 =============================================================================
Six Months Ended March 31, ---------------------------------------------- 1996 1995 ----------------- ----------------- Cash Flows from Operating Activities: Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,153,167 $ 873,386 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization . . . . . . . . . . . . . . . . . . 708,765 680,049 Amortization of discount on senior note and deferred finance costs. . . . . . . . . . . . . . . . . . . . . 37,325 36,700 Property impairments and abandonments . . . . . . . . . . . . . . 33,663 19,000 Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . 917,000 159,000 Gain on dispositions and investments. . . . . . . . . . . . . . . (1,914,192) (833) Change in operating assets and liabilities net of effects from purchase of subsidiaries: (Increase) decrease in accounts receivable. . . . . . . . . . . (494,396) 150,207 Increase in prepaid expenses and other current assets . . . . . (381,971) (172,439) Decrease in accounts payable. . . . . . . . . . . . . . . . . . (354,820) (257,221) Increase (decrease) in other current liabilities. . . . . . . . 23,790 (46,269) Accretion of discount . . . . . . . . . . . . . . . . . . . . . (507,543) (300,592) (Increase) decrease in inventory. . . . . . . . . . . . . . . . 10,620 (3,822) ----------------- ----------------- Net Cash Provided by Operating Activities . . . . . . . . . . . . 1,231,408 1,139,457 Investing Activities: Capital expenditures. . . . . . . . . . . . . . . . . . . . . . . . (408,204) (457,847) Proceeds from sale of assets. . . . . . . . . . . . . . . . . . . . 11,061,957 84,911 Increase in other assets. . . . . . . . . . . . . . . . . . . . . . (35,320) (12,854) Investments in real estate loans. . . . . . . . . . . . . . . . . . (11,503,933) (12,335,779) ----------------- ----------------- Net Cash Used in Investing Activities . . . . . . . . . . . . . . (885,500) (12,721,569) Financing Activities: Short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . - 2,500,000 Long-term borrowings. . . . . . . . . . . . . . . . . . . . . . . . - 2,000,000 Dividends paid. . . . . . . . . . . . . . . . . . . . . . . . . . . (358,346) - Principal payments on long-term debt. . . . . . . . . . . . . . . . (12,728) (11,400) Proceeds from issuance of common stock. . . . . . . . . . . . . . . 82,001 - (Increase) decrease in restricted cash. . . . . . . . . . . . . . . (90,001) 5,211,456 Purchase of treasury stock. . . . . . . . . . . . . . . . . . . . . (47,252) (95,603) ----------------- ----------------- Net Cash Provided by (Used in) Financing Activities . . . . . . . (426,326) 9,604,453 Decrease in cash and cash equivalents. . . . . . . . . . . . . . . . . . . . (80,418) (1,977,659) Cash at beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . 2,457,432 2,597,556 ----------------- ----------------- Cash at March 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,377,014 $ 4619,897 ================= =================
Supplemental disclosures of cash flow information: Accounting policies: Cash includes highly liquid investments with a maturity of three months or less. Interest: Cash paid during the first six months of fiscal 1996 for: Interest . . . . . . . . . . . . . . . . . .$397,651 Federal income taxes . . . . . . . . . .. .$370,000 The accompanying notes are an integral part of these financial statements. 4 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) ============================================================================= Note 1 - Management's Opinion Regarding Interim Financial Statements In the opinion of management, all adjustments (consisting of normal recurring accruals) necessary for a fair statement of the results of operations for the interim period included herein have been made. The accounting policies followed by the Company are set forth in Note 1 to the Company's consolidated financial statements for the fiscal year ended September 30, 1995, included in the Company's Annual Report on Form 10-KSB. Note 2 - Transactions with Related Parties A law firm in which an officer of the Company holds "of counsel" status provides legal services to the Company. The Company believes that such services are provided on terms no less favorable to the Company than those which would be obtainable from third parties providing similar services. The Company holds real estate loans with respect to twenty-one properties owned by third parties. These properties are managed by a corporation in which an officer of the Company is an officer and minority shareholder. Management fees payable under the management agreements are subordinated to receipt by the Company of minimum required debt service payments under the loans. The Company maintains depository and investment accounts in a bank subsidiary of JeffBanks, Inc., in which the Chairman of the Company serves as a director. The Chairman's wife is a director and executive officer of JeffBanks, Inc. Note 3 - Long-term Debt Long-term debt consists of the following: March 31, September 30, 1996 1995 ------------------ ------------------- Mortgage note payable to a bank, secured by real estate, monthly installments of approximately $3,300 including interest at 3/4% above the prime rate through May 2002. . . . . . . $ 228,617 $ 241,347 Loan payable to a bank, 20 equal semiannual installments of $32,143 and quarterly payments of interest at 84% of the prime rate through July 1996, at which time the rate converts to 1/2% above the prime rate through 2003. . . . . . . . . 449,982 482,128 9.5% senior secured note payable, interest due semi- annually, principal due May 2004. . . . . . . . . . . . . . . . . . 7,896,459 7,890,207 ------------------ ------------------- 8,575,058 8,613,682 Less amounts payable in one year. . . . . . . . . . . . . . . . . . 92,000 91,000 ------------------ ------------------- $ 8,483,058 $ 8,522,682 ================== =================== 5 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) ============================================================================= The long-term debt maturing over the next five years is as follows: 1996 - $92,000; 1997 - $94,000; 1998 - $97,000; 1999 - $101,000; and 2000 - $105,000. The senior secured note payable is collateralized by substantially all of the Company's oil and gas properties. Certain credit agreements require the Company to comply with certain restrictive covenants. At March 31, 1996, the Company was in compliance with such covenants. Note 4 - Formation of Limited Partnerships In 1989 and 1990, the Company sponsored two pipeline income program limited partnerships (the "1989 Program" and "1990 Program") which purchased pipeline systems from the Company. The Company had guaranteed that the limited partners in these programs would receive cash distributions during each of the first two years of the operation of the programs equal to 12% of their capital contributions to the programs. To the extent that cash flow to the programs was less than 12%, the Company contributed sufficient capital to allow the guaranteed distributions to the limited partners to be made. The Company believes the amount contributed for such distributions ($693,000), for which it is entitled to be repaid on a preferential basis upon termination of the programs, will be realized upon final disposition of the pipelines. The limited partners in both programs have the right to sell their interests in the programs to the Company following the fifth anniversary of the respective program's closing at a price equal to 4.5 times the cash flow per unit during the fifth year of partnership operations, subject to a maximum sale price of $50,000 per unit. The limited partners may also cause the sale of the pipelines after the fifth year of the respective partnership's operations. In accordance with the terms of the limited partnership agreement, during fiscal 1995 the Company repurchased a total of 20 units from limited partners in the 1989 Program, for a total cost of approximately $240,000. The Company purchased four units from limited partners in the 1990 program in the first quarter of fiscal 1996 for approximately $38,000. Note 5 - Investments in Real Estate At March 31, 1996 the Company held real estate loans having aggregate face values of $77,487,000 which were being carried at aggregate costs of $20,972,000. The following is a summary of the changes in the carrying value of the Company's investments in real estate loans for the six months ended March 31, 1996:
Balance, September 30, 1995 $ 17,991,415 New real estate loans 10,800,484 Additions to existing loans 744,408 Accretion of discount 507,543 Gains on sale of loan participations and refinancings (revenue contribution) 1,909,027 Proceeds (cash): Refinancings (6,612,000) Participations (4,369,000) ----------------- Balance, March 31, 1996 $ 20,971,877 =================
6 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) ============================================================================= Investments in real estate loans at March 31 consist of:
March 31, September 30, 1996 1995 ------------------- ----------------- Property 001 Subordinated wraparound note, face value of $4,500,000, secured by residential real estate located in Pittsburgh, PA, interest at 14.5%, due December 31, 2002 . . . . . . . . . . . . . . . . . $ 2,383,558 $ 2,334,850 Property 002 Mortgage note, face value of $1,080,000, secured by residential real estate located in Philadelphia, PA, interest at 12%, due October 31, 1998. In June 1995, the Company sold a senior participation in this mortgage for $600,000, resulting in a remaining face value due the Company of $797,000 . . . . . . . . . . . . . . 179,086 147,972 Property 003 Mortgage note, face value of $1,312,000, secured by residential real estate located in Philadelphia, PA, interest at 2 1/2% over the monthly national median annualized cost of funds for SAIF-insured institutions as announced by the Federal Deposit Insurance Corporation, due October 31, 1998. In June 1995, the Company sold a senior participation in this mortgage for $896,000, resulting in a gain of $209,000 and a remaining face value due the Company of $479,000 . . . . . . . . . . . . . . 202,264 189,347 Property 004 Mortgage note, face value of $4,234,000, secured by commercial real estate located in Pittsburgh, PA, interest at 10.6%, due February 7, 2001. In June 1995, the Company sold a senior participation in this mortgage for $840,000, resulting in a gain of $146,000 and a remaining face value due the Company of $3,498,000. In February 1996, the property was transferred to a third party, subject to this existing mortgage, the Company received $500,000 in satisfaction of a second mortgage on this property resulting in a gain of $442,000. . . . . . . . 1,085,281 675,805 7 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) ============================================================================= Property 005 Note, face value of $3,559,000, secured by an unrecorded deed relating to real estate located in Philadelphia, PA, interest at 2% over the yield of one-year United States Treasury securities, due July 31, 1998. . . . . . . . . 715,300 724,422 Property 006 Mortgage note, face value of $1,798,000, secured by residential real estate located in Margate, NJ, interest at the Chase Manhattan Bank prime rate (but not less than 9% nor greater than 15.5%), due January 1, 2003. In June 1995, the Company sold a senior participation in this mortgage for $685,000, resulting in a remaining face value due the Company of $1,370,000 . . . . . . . . . . . . . . . . . 447,607 424,749 Property 007 Note, face value of $1,776,000, secured by a judgment lien, relating to real estate located in St. Cloud, MN, interest at 10%, due December 31, 2014. . . . . . . . . . . . . . . . . . . . . . . . 507,191 489,196 Property 008 Note, face value of $4,183,000, interest at 1/2% over the Maryland National Bank prime rate, due October 31, 1998. . . . . . . . . . . . . . . . . . 1,520,480 1,469,899 Property 009 Subordinated wraparound note, face value of $12,000,000 consisting of a first mortgage held by the Company of $9,000,000 secured by commercial real estate located in Washington, D.C., a note and a $3,000,000 second mortgage held by an unrelated party, interest at 12%, due November 30, 1998. In October 1995, the owner of the property refinanced the property with an an unaffiliated party, simultaneously paying the Company $6,487,000 toward principal and interest on this loan . . . . . . . . . . 3,144,207 9,252,716 8 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) ============================================================================= Property 010 Mortgage note, face value of $1,211,000, secured by residential real estate located in Philadelphia, PA, interest at 3% over the Federal Home Loan Bank of Pittsburgh rate, due September 2, 1999. In June 1995, the Company sold a senior participation in this mortgage for $600,000, resulting in a remaining face value due the Company of $827,000. . . . . . . . . 112,384 107,450 Property 011 Mortgage note, face value of $900,000, secured by commercial real estate located in Washington, D.C., interest at 1 1/2% over the First Union National Bank rate, due September 30, 1999. In June 1995, the Company sold a senior participation in this mortgage for $685,000, resulting in a remaining face value due the Company of $345,000 . . . . . . . . . . . . . . 311,393 289,504 Property 012 Note, face value of $736,000, interest at 2% over the Mellon Bank prime rate, due October 31, 1999. . . . . . . . . . . . . . . . . . . . . . . . 523,917 545,077 Property 013 Mortgage notes, face value of $1,962,000, secured by residential real estate located in Philadelphia, PA, varying interest rates from 9 1/2% to 14.5%, due December 2, 1999. In June 1995, the Company sold a senior participation in this mortgage for $1,160,000, resulting in a remaining face value due the Company of $1,096,000 . . . . . . . . . . . . . . . . . 291,396 195,092 Property 014 Mortgage note, face value of $3,000,000, secured by commercial real estate located in Pasadena, CA, interest at 2.75% over the average cost of funds to FSLIC-insured savings and loan associations, 11th District (but not less than 5.5% nor greater than 15.5%), due May 1, 2001. In September, 1995, the Company sold a senior participation in this mortgage for $2,000,000 resulting in a remaining face value due the Company of $1,004,000 . . . . . . . . . . . . . 298,374 295,608 9 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) ============================================================================= Property 015 Subordinated wraparound note, face value of $3,500,000, secured by residential real estate located in North Concord, NC, interest at 12%, due August 25, 2000 . . . . . . . . . . . . . . . . . . 251,679 146,765 Property 016 Wraparound note, face value of $5,198,000, secured by real estate located in Rancho Cordova, CA, interest at 8.5%, due December 31, 2019. In November 1995, the Company bought the underlying first mortgage for $1,328,000 and sold a senior participation in this mortgage for $2,400,000 resulting in a gain of $799,000 and a remaining face value due the Company of $4,143,000 . . . . . . . . . . . . . 404,295 702,963 Property 017 Mortgage note, face value of $4,627,000, secured by residential real estate located in Philadelphia, PA, interest at 7.75%, due September 12, 1998. . . . . . . . . . . . . . . . . . . 3,944,060 - Property 018 Mortgage note, face value of $2,271,000, secured by commercial real estate located in Northridge, CA, interest at 9%, due December 27, 2000. In December 1995, the Company sold a senior participation in this mortgage for $1,969,000 resulting in a gain of $538,000 and a remaining face value due the Company of $743,000 . . . . . . . . . . . . . . . . . . 685,945 - Property 019 Subordinated wraparound note, face value of $3,300,000 secured by commercial real estate located in Elkins, WV, interest at 13.6%, due in equal installments through December 31, 2018. . . . . . . . . . . . . . . . . . . . . . . . . . 360,355 - Property 020 Mortgage note, face value of $4,800,000 secured by real estate located in Cherry Hill, NJ, interest at ___%, due February 7, 2001. . . . . . . 2,715,935 - 10 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) ============================================================================= Property 021 Mortgage notes, face value of $3,269,000, secured by real estate located in Philadelphia, PA, interest at 12%, due March 15, 2001 . . . . . . . . 887,171 - ----------------- ----------------- $ 20,971,878 $ 17,991,415 ================= ================= As referenced above, in December 1995, the Company sold senior participations in two real estate loans to an insurance company, pursuant to which the Company agreed to replace any non-performing loan with a similar but performing loan. In addition, the Company issued to the insurance company warrants to purchase 65,535 shares of the Company's common stock at the price of $11.75 per share. Further, as referenced above, owners of two properties on which the Company held a mortgage note refinanced those properties with unaffiliated parties. The Company received payments of principal and interest on these notes. Note 6 - Stock Dividends On December 20, 1995 and March 12, 1996 the Board of Directors declared 6% stock dividends of the Company's Class A common stock payable on January 31, 1996 and April 30, 1996, to shareholders of record on January 17, 1996 and April 16, 1996, respectively. On May 9, 1996, the Board of Directors authorized a five-for-two stock split effected in the form of a 150% stock dividend payable on May 31, 1996 to shareholders of record on May 20, 1996. This will result in the issuance of 1,135,996 additional shares of Class A common stock. Earnings per share and weighted average shares outstanding have been restated to reflect the above transactions. 11 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Revenues Real estate finance revenues represent interest and fees earned and gains recognized on real estate loans owned by the Company. Real estate finance revenues increased to $1,866,000 (6%) in the quarter and $3,951,000 (61%) in the six months ended March 31, 1996 compared to the prior year. This increase was attributable to gains recognized on the refinancing and sale of participations in loans held by the Company. A comparison of the Company's revenues from real estate follows: Quarter Ended Six Months Ended March 31, March 31, -------------------- ---------------------- Revenues (in thousands) 1996 1995 1996 1995 - ----------------------------------------------------------------------------- Interest $ 799 $ 866 $1,383 $1,554 Fees 605 903 659 903 Gains 462 - 1,909 - ------ ------ ------ ------ $1,866 $1,769 $3,951 $2,457 During the quarter and six months ended March 31, 1996, the Company purchased four and six real estate loans, respectively, for a total cost of $3,414,000 and $10,800,000, respectively. During the quarter and six months ended March 31, 1995, the Company invested $8,000,000 in one loan and $12,985,000 in five loans, respectively. In addition, the Company added $549,000 and $744,000 in the quarter and six months ended March 31, 1996, compared to $199,000 and $259,000 in the similar periods of the prior year. All of the loans were purchased at a discount to the original face value. The Company intends to pursue similar real estate investment opportunities as they become available to the extent allowed by the Company's investment capability. Equipment leasing represents fees associated with managing limited partnerships in which the Company is a general partner as well as lease brokerage fees and the Company's pro rata share of income from these partnerships. The Company acquired this business in September, 1995. Production revenues for the quarter and six months ended March 31, 1996 decreased 6% and 4%. respectively, compared to the same periods of the previous year. A comparison of the Company's revenues, daily production volumes, and average sales prices follows: Quarter Ended Six Months Ended March 31, March 31, Revenues (in thousands) 1996 1995 1996 1995 --------------------------------------------------------------------------- Gas $ 606 $ 675 $ 1,286 $ 1,376 Oil 143 131 277 262 Production Volumes --------------------------------------------------------------------------- Gas (Mcf/day) 2,935 3,167 3,168 3,175 Oil (Bbls/day) 90 89 88 87 Average Sales Price --------------------------------------------------------------------------- Gas (per Mcf) $ 2.27 $ 2.37 2.22 2.38 Oil (per Bbl) 17.44 16.24 17.08 16.55 12 Natural gas revenues decreased 10% due to a 4% decrease in the average price per mcf of natural gas and a 6% decrease in production volumes for the quarter ended March 31, 1996, as compared to the prior year. For the six months ended March 31, 1996, natural gas revenues decreased 7% due to a 7% decrease in production volumes, as compared to the prior year. Oil revenues increased by 9% due to a 2% increase in production volumes and a 7% increase in the average price received per barrel of oil for the quarter ended March 31, 1996, as compared to the prior year. For the six months ended March 31, 1996, oil revenues increased 5% due to a 2% increase in production volumes and a 3% increase in the average price received per barrel of oil, as compared to the prior year. Natural gas production volumes in the Company's New York field of operations for the quarter and six months were down 29% and 21%, respectively, due to the natural decline in production from existing wells. Production volumes in the Company's Ohio fields of operation increased 3% for the quarter and 9% for the six months ended March 31, 1996 compared to the same periods of the prior year as a result of the acquisition of additional interests in existing wells from limited partners and other third parties. The Company spent a total of $756,000 in the prior two years to acquire these interests. The Company also participated in the drilling of three successful exploratory wells and recompleted one successful developmental well during fiscal 1995. During the first half of fiscal 1996 the Company participated in the drilling of two successful developmental wells and intends to participate in the drilling of additional wells during the remainder of fiscal 1996. The Company's oil and gas revenues have been and will continue to be affected by changes in oil and gas prices. The Company is unable to control or accurately predict these changes in prices. The Company's proved developed reserves are predominantly natural gas. Costs and Expenses Exploration and production expenses decreased $55,000 (13%) for the quarter and $109,000 (13%) for the six months ended March 31, 1996, compared to the prior year. These decreases were primarily attributable to decreased cleanout and workover costs as compared to the same periods of the prior year. Real estate finance expenses decreased 20% for the quarter and 15% for the six months ended March 31, 1996, compared to the same periods a year ago. These decreases are a result of lower legal costs associated with the Company's real estate financing activities. Equipment leasing expenses include costs incurred in the managment of equipment leasing partnerships in which the Company is a general partner. In accordance with the terms of the related partnership agreements, the Company is reimbursed by the partnerships for certain general and administrative expenses incurred and allocable, directly or indirectly, to the partnerships. Such reimbursements are included in equipment leasing revenue. 13 Depreciation and amortization consists primarily of amortization of oil and gas properties which, as a percentage of oil and gas revenues, decreased from 28% to 21% in the quarter and 28% to 27% in the first six months of fiscal 1996 as compared to the prior year. Variations from period to period are attributable to changes in the Company's oil and gas reserve quantities, product prices, and fluctuations in the depletable costs basis of oil and gas properties. Liquidity and Capital Resources The Company had $2,377,000 in cash and cash equivalents on hand at March 31, 1996. The Company's ratio of current assets to current liabilities was 4.7:1 on March 31, 1996, up from 2.9:1 at September 30, 1995. Working capital at March 31, 1996 was $3,710,000, up from $2,595,000 at September 30, 1995. Cash provided by operating activities increased $92,000 (8%) in the first half of fiscal 1996 as compared to the prior year. This increase was the result of an increase in net income, partially offset by changes in net working capital. The Company invested $10,800,000 in the acquisition of six real estate loans and advanced $744,000 on existing loans held by the Company during the first six months of fiscal 1996 as compared to the investment of $12,985,000 in the acquisition of five real estate loans and $259,000 in advances during the similar prior periods. In addition, the Company sold senior participations in two loans and received proceeds upon the refinancing of two loans amounting to $10,981,000 in the first six months of fiscal 1996. No such proceeds were received in the prior fiscal year. As a result, the Company's net cash used in investing activities decreased $11,836,000 during the first quarter of fiscal 1996, as compared to the prior year. The Company's cash flow provided by financing activities decreased $10,031,000 during the first half of fiscal 1996 as compared to the prior year. During the first half of fiscal 1995, the Company (i) sold a $2,000,000 note, (ii) borrowed $2,500,000 and (iii) by pledging substantially all of the Company's oil and gas properties as collateral security for the Company's May 1995 $8,000,000 senior secured note, was able to make available for corporate investment purposes $5,211,000 in previously restricted cash. In addition, the Company resumed the payment of dividends in the fourth quarter of fiscal 1995 and paid $358,000 in dividends the first half of fiscal 1996. The Company's capital spending is predominantly discretionary--the ultimate level of spending will depend on, among other things, the Company's assessment of investment opportunities in the real estate finance, energy and equipment leasing industries. In real estate, the Company will continue to expand its real estate loan portfolio as, and when, economically attractive opportunities become available. In energy, the Company will seek to add to its reserve base through selected acquisition of producing properties and further development of the Company's mineral interests. PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K a) Exhibits: 11.1 Calculation of Primary and Fully Diluted Earnings per share. 27 Financial Data Schedule b) Reports on Form 8-K: There were no Reports on Form 8-K filed by the Company for the quarter ending March 31, 1996. 15 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. RESOURCE AMERICA, INC. (Registrant) Date May 14, 1996 By /s/ Michael L. Staines ---------------------- -------------------------------------- Michael L. Staines Senior Vice President and Secretary Date May 14, 1996 By /s/ Nancy J. McGurk ---------------------- -------------------------------------- Nancy J. McGurk Vice President - Finance and Treasurer
EX-11 2 EXHIBIT 11.1 CALCULATION OF PRIMARY AND FULLY DILUTED EARNINGS PER SHARE Earnings per common share and common share equivalent are determined by dividing net income by the weighted average number of common shares and common share equivalents outstanding during each period. Common share equivalents consist of common shares issuable upon the exercise of stock options, provided the effect is dilutive, less common shares assumed to have been purchased with the proceeds therefrom. Provided below is a table reconciling common stock outstanding to common stock and common stock equivalents used to compute earnings per share:
Three Months Six Months Ended March 31, Ended March 31, ----------------------- ---------------------- Primary 1996 1995 1996 1995 --------- --------- --------- --------- --------- Weighted average number of common shares outstanding 1,895,500 1,910,200 1,889,300 1,914,600 Assuming exercise of options and warrants reduced by the number of shares which could have been purchased with the proceeds from exercise of such options and warrants 622,900 230,300 583,600 173,400 ---------- ---------- ---------- --------- 2,518,400 2,140,500 2,472,900 2,088,000 Fully Diluted ------------------ Weighted average number of common shares outstanding 1,895,500 1,910,200 1,889,300 1,914,600 Assuming exercise of options and warrants reduced by the number of shares which could have been purchased with the proceeds from exercise of such options and warrants 649,000 230,300 596,600 173,400 ---------- ---------- ---------- --------- 2,544,500 2,140,500 2,485,900 2,088,000 This calculation is submitted in accordance with Securities Exchange Act of 1934 Release no. 9083 although not required by footnote 2 to paragraph 14 of APB Opinion no. 15 because it results in dilution of less than 3%.
EX-27 3
5 6-MOS SEP-30-1996 OCT-01-1995 MAR-31-1996 2,377,014 0 1,797,952 0 117,868 4,709,362 26,733,953 14,444,407 40,999,968 998,710 8,483,058 0 0 20,465 40,979,503 40,999,968 1,591,784 9,278,136 735,849 4,843,134 0 0 428,725 4,440,167 1,287,000 3,153,167 0 0 0 3,153,167 1.28 1.27
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