-----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, Tx1v9YZMIxQn86AjWtQPxoB2cdO4XT9RSREOQ9DDd5SPS6pDqFaTypiBGlD2F4Sq FTxRLe3JfZnOV8s4JTPjxA== 0000083402-96-000024.txt : 19960816 0000083402-96-000024.hdr.sgml : 19960816 ACCESSION NUMBER: 0000083402-96-000024 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: RESOURCE AMERICA INC CENTRAL INDEX KEY: 0000083402 STANDARD INDUSTRIAL CLASSIFICATION: SHORT-TERM BUSINESS CREDIT INSTITUTIONS [6153] 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: 96612898 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 June 30, 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: 1,894,410 ------------- RESOURCE AMERICA, INC. INDEX PAGE NUMBER PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheet (Unaudited) June 30, 1996, and September 30, 1995 1 & 2 Consolidated Statement of Income (Unaudited) - Three Months and Nine Months Ended June 30, 1996, and 1995 3 Consolidated Statement of Cash Flows (Unaudited) - Nine Months Ended June 30, 1996, and 1995 4 Notes to Consolidated Financial Statements (Unaudited) 5 - 12 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 13 - 15 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 16 PART I. FINANCIAL INFORMATION CONSOLIDATED BALANCE SHEET (UNAUDITED) RESOURCE AMERICA, INC., AND SUBSIDIARIES June 30, 1996, and September 30, 1995 =============================================================================== June 30, September 30, 1996 1995 -------------- -------------- ASSETS CURRENT ASSETS Cash and cash equivalents . . . . . . . . . $ 4,224,835 $ 2,457,432 Accounts and notes receivable . . . . . . . 3,088,775 1,303,556 Inventory . . . . . . . . . . . . . . . . . 118,674 128,488 Prepaid expenses and other current assets . 377,221 34,557 -------------- -------------- Total Current Assets . . . . . . . . . 7,809,505 3,924,033 PROPERTY AND EQUIPMENT Oil and gas properties and equipment (successful efforts) . . . . . . . . . . 24,128,444 24,039,762 Gas gathering and transmission facilities . 1,527,723 1,514,127 Other . . . . . . . . . . . . . . . . . . . 1,422,378 1,072,243 -------------- -------------- 27,078,545 26,626,132 Less - accumulated depreciation, depletion, and amortization . . . . . . . . . . . . (14,735,052) (14,043,455) -------------- -------------- Net Property and Equipment . . . . . . 12,343,493 12,582,677 INVESTMENTS IN REAL ESTATE LOANS . . . . . . 19,082,740 17,991,415 RESTRICTED CASH . . . . . . . . . . . . . . . 994,851 904,409 OTHER ASSETS . . . . . . . . . . . . . . . . 2,041,605 2,147,430 -------------- -------------- $ 42,272,194 $ 37,549,964 ============== ============== The accompanying notes are an integral part of these financial statements. 1 CONSOLIDATED BALANCE SHEET (UNAUDITED) RESOURCE AMERICA, INC., AND SUBSIDIARIES June 30, 1996, and September 30, 1995 ================================================================================ June 30, September 30, 1996 1995 -------------- --------------- LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable - trade. . . . . . . . . . $ 495,741 $ 721,673 Accrued liabilities . . . . . . . . . . . . 322,660 516,066 Current portion of long-term debt . . . . . 93,000 91,000 -------------- -------------- Total Current Liabilities. . . . . . . 911,401 1,328,739 LONG-TERM DEBT . . . . . . . . . . . . . . . 8,478,374 8,522,682 DEFERRED INCOME TAXES . . . . . . . . . . . . 2,367,000 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, 1,894,410 and 665,212 issued and outstanding shares (including 151,800 and 152,700 treasury shares) at June 30, 1996, and September 30, 1995, respectively . . . . . . . . . . . . . . 20,463 8,179 Additional paid-in capital. . . . . . . . . 21,767,988 19,214,210 Retained earnings . . . . . . . . . . . . . 11,885,363 10,532,719 Less cost of treasury shares. . . . . . . . (2,708,413) (2,721,437) Less loan receivable from ESOP. . . . . . . (449,982) (482,128) -------------- -------------- Total Stockholders' Equity . . . . . . 30,515,419 26,551,543 -------------- -------------- $ 42,272,194 $ 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 Nine Months Ended June 30, 1996, and 1995 ===============================================================================
Three Months Nine Months Ended June 30, Ended June 30, ----------------------------- ------------------------------ 1996 1995 1996 1995 ------------- ------------- -------------- ------------- REVENUES Real estate finance . . . . . . . . . . . $ 1,628,919 $ 1,983,164 $ 5,580,242 $ 4,439,813 Equipment leasing . . . . . . . . . . . . 1,126,132 - 3,785,543 - Energy: production. . . . . . . . . . . . 932,879 823,400 2,524,663 2,485,046 : services. . . . . . . . . . . . . 447,823 581,189 1,417,739 1,533,471 Interest . . . . . . . . . . . . . . . . 36,047 9,178 141,749 102,084 ------------- ------------- -------------- ------------- 4,171,800 3,396,931 13,449,936 8,560,414 COSTS AND EXPENSES Energy: exploration and production . . . 398,249 392,369 1,134,098 1,237,044 : services . . . . . . . . . . . . 239,925 254,627 734,419 780,250 Real estate finance . . . . . . . . . . . 108,560 296,215 411,728 654,841 Equipment leasing . . . . . . . . . . . . 540,791 - 1,707,051 - General and administrative . . . . . . . 593,059 642,203 1,597,780 1,828,754 Depreciation and amortization . . . . . . 350,480 365,399 1,059,245 1,045,448 Interest . . . . . . . . . . . . . . . . 214,041 304,651 642,766 844,277 Other - net . . . . . . . . . . . . . . . (6,323) (3,121) (5,171) (3,632) ------------- ------------- -------------- ------------- 2,438,782 2,252,343 7,281,916 6,386,982 ------------- ------------- -------------- ------------- INCOME FROM OPERATIONS . . . . . . . . . 1,733,018 1,144,588 6,168,020 2,173,432 OTHER INCOME Gain on sale of property . . . . . . . . 2,000 2,749 7,165 1,291 ------------- ------------- -------------- ------------- Income before income taxes . . . . . . . . 1,735,018 1,147,337 6,175,185 2,174,723 Provision for income taxes . . . . . . . . 503,000 218,000 1,790,000 372,000 ------------- ------------- -------------- ------------- NET INCOME . . . . . . . . . . . . . $ 1,232,018 $ 929,337 $ 4,385,185 $ 1,802,723 ============= ============= ============== ============= NET INCOME PER COMMON SHARE - PRIMARY . . . . . . . . . . . . . . . . . $ .46 $ .42 $ 1.72 $ .86 ============= ============= ============== ============= Weighted average common shares outstanding . . . . . . . . . . . . . . . 2,705,600 2,183,000 2,549,000 2,120,000 ============= ============= ============== ============= NET INCOME PER COMMON SHARE - FULLY DILUTED . . . . . . . . . . . . . . $ .46 $ .42 $ 1.64 $ .82 ============= ============= ============== ============= Weighted average common shares outstanding . . . . . . . . . . . . . . . 2,705,600 2,183,000 2,675,000 2,189,000 ============= ============= ============== =============
The accompanying notes are an integral part of these financial statements. 3 CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) RESOURCE AMERICA, INC., AND SUBSIDIARIES Nine Months Ended June 30, 1996, and 1995 ================================================================================
Nine Months Ended June 30, ------------------------------- 1996 1995 -------------- -------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income . . . . . . . . . . . . . . . . . . . . . . . $ 4,385,185 $ 1,802,723 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization . . . . . . . . . . . . . 1,059,245 1,045,448 Amortization of discount on senior note and deferred finance costs . . . . . . . . . . . . . . . 55,987 55,361 Property impairments and abandonments . . . . . . . . . 36,662 38,500 Deferred income taxes . . . . . . . . . . . . . . . . . 1,220,000 216,000 Gain on dispositions and investments . . . . . . . . . (3,432,951) (1,231,027) Accretion of discount . . . . . . . . . . . . . . . . . (776,488) 23,918 Change in operating assets and liabilities: (Increase) decrease in accounts receivable . . . . . (1,785,219) 250,411 Increase in prepaid expenses and other current assets . . . . . . . . . . . . . . . . (342,664) (139,638) Decrease in accounts payable . . . . . . . . . . . . (225,932) (292,177) Decrease in other current liabilities . . . . . . . . (193,407) (155,859) (Increase) decrease in inventory . . . . . . . . . . 9,814 (4,007) -------------- -------------- NET CASH PROVIDED BY OPERATING ACTIVITIES . . . . . . . 10,232 1,609,653 INVESTING ACTIVITIES: Capital expenditures . . . . . . . . . . . . . . . . . . (766,154) (632,686) Proceeds from sale of properties and investments . . . . 16,697,180 5,790,905 Increase in other assets . . . . . . . . . . . . . . . . (110,348) (32,107) Additions to real estate loans . . . . . . . . . . . . . (13,459,113) (12,142,822) -------------- --------------- NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES . . 2,361,565 (7,016,710) FINANCING ACTIVITIES: Short-term borrowings . . . . . . . . . . . . . . . . . . - 2,500,000 Long-term borrowings . . . . . . . . . . . . . . . . . . - 2,000,000 Dividends paid . . . . . . . . . . . . . . . . . . . . . (567,879) - (Increase) decrease in restricted cash . . . . . . . . . (90,442) 3,883,268 Principal payments on debt . . . . . . . . . . . . . . . (19,538) (2,517,541) Purchase of treasury stock . . . . . . . . . . . . . . . (47,258) (95,603) Proceeds from issuance of common stock . . . . . . . . . 120,723 - -------------- -------------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES . . (604,394) 5,770,124 INCREASE IN CASH AND CASH EQUIVALENTS . . . . . . . . . . . 1,767,403 363,067 CASH AT BEGINNING OF YEAR . . . . . . . . . . . . . . . . . 2,457,432 2,597,556 ------------- -------------- CASH AT JUNE 30 . . . . . . . . . . . . . . . . . . . . . . $ 4,224,835 $ 2,960,623 ============= ==============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Accounting policies: Cash includes highly liquid investments with a maturity of three months or less. Cash paid during the first nine months of 1996 for interest: $776,780 Cash paid during the first nine month of 1996 for federal income taxes: $570,000 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 The Company holds real estate loans with respect to twenty-three 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: June 30, 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. . . . . . . $ 221,809 $ 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. . . . . . . . . . . . . . . . . . 7,899,583 7,890,207 ------------ ------------ 8,571,374 8,613,682 Less amounts payable in one year. . . . . . . . . . . . . . . . 93,000 91,000 ------------ ------------ $ 8,478,374 $ 8,522,682 ============ ============
5 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) ================================================================================ The long-term debt maturing over the next five years is as follows: 1996 - $93,000; 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 June 30, 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 The Company has focused its real estate activities on the purchase of income producing mortgages at a discount to the face value of such mortgages and also to the appraised value of the collateral underlying the mortgage. Cash received by the Company for payment on each mortgage is allocated between principal and interest - the interest portion of the cash received is recorded as income to the Company. Additionally, the Company records as income the accrual of a portion of the discount to the underlying collateral value. This "accretion of discount" amounted to $776,488 during the nine months ended June 30, 1996. As the Company sells participations or receives funds from refinancings in such mortgages, a portion of the cash received is employed to reduce the cumulative accretion of discount included in the carrying value of the Company's investment in real estate loans. At June 30, 1996 the Company had investments in real estate loans totaling $19,082,740, including $1,972,500 in cumulative accretion of discount, with an aggregate receivable of $82,657,000. 6 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) ================================================================================ The following is a summary of the changes in the carrying value of the Company's investments in real estate loans for the nine months ended June 30, 1996: Balance, September 30, 1995 $ 17,991,415 New real estate loans 12,061,599 Additions to existing loans 1,438,473 Accretion of discount 776,488 Gains on sale of loan participations and refinancings (revenue contribution) 2,825,787 Proceeds (cash): Refinancings (9,632,023) Participations (6,379,000) ---------------- Balance, June 30, 1996 $ 19,082,740 ================ Investments in real estate loans at June 30 consist of: June 30, 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 . . . . . . . $ 2,399,917 $ 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 . . . . . . . . 178,486 147,972 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 . . . . . . . . . . . . . 225,811 189,347 7 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) ================================================================================ 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 . . . . . . . 1,063,149 675,805 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 October 31, 1998 . . . . . . . . . 716,616 724,422 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 June 1, 1998. In June 1995, the Company sold a senior participation in this mortgage for $850,000. In June 1996, the owner of the property refinanced the property with an unaffiliated party, simultaneously paying the Company $850,000 toward the principal and interest on this loan. The proceeds from the refinancing were used to pay off the existing senior participation, resulting in a remaining face value due the Company of $1,632,000 . . . . . . . . . . . 478,018 424,749 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 . . . . . . . . . . . . . 517,357 489,196 Property 008 Note, face value of $4,183,000, interest at 1/2% over the Maryland National Bank prime rate, due July 31, 1998 . . . . . . . . . . . . . 1,542,620 1,469,899 8 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) ================================================================================ 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 unaffiliated party, simultaneously paying the Company $6,487,000 toward principal and interest on this loan . . . . . . . 3,164,101 9,252,716 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 . . . . . . . . . . . . . 112,902 107,450 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 . . . . . . . . . . . . . 323,445 289,504 Property 012 Note, face value of $736,000, interest at 2% over the Mellon Bank prime rate, due October 31, 1999. . 520,101 545,077 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 . . . . . . . 509,238 195,092 9 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) ================================================================================ 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 . . . 299,131 295,608 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 . . . . . . . . 302,775 146,765 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 . . . 412,144 702,963 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. In April 1996, the owner of the property refinanced the property with an unaffiliated party, simultaneously paying the Company $3,020,024 toward principal and interest on this loan . . . . . . . 873,794 - 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 . . . . . . . . . . . . . 750,374 - 10 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) ================================================================================ 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 . . . . . . . . . 406,071 - Property 020 Mortgage note, face value of $4,800,000 secured by real estate located in Cherry Hill, NJ, interest at 10%, due February 7, 2001 . . . 2,766,164 - Property 021 Mortgage notes, face value of $3,269,000, secured by real estate located in Philadelphia, PA, interest at 12%, due March and April, 2001. In June 1996, the Company sold a senior participation in this mortgage for $2,010,000, resulting in a gain of $916,759 and a face value due the Company of $1,259,000 . . . . . . . . . . . . 375,293 - Property 022 Subordinated mortgage note, face value of $600,000, secured by real estate located in Philadelphia, PA, interest at 12%, due March 31, 2001 . . . . . . . . . . . . . . . 112,707 - Property 023 Subordinated participation loan, face value of $2,038,000, secured by real estate located in Philadelphia, PA, interest at 85% of the 30-day rate on $100,000 Certificates of Deposit as published by the Wall Street Journal plus 2.75%, due January 1, 1997 . . . . . . . . . . 1,032,526 - ------------ ------------ $ 19,082,740 $ 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 184,088 shares of the Company's common stock at the price of $4.18 per share. Further, as referenced above, owners of three 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. 11 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) ================================================================================ 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. These dividends resulted in the issuance of 1,219,167 additional shares of Class A common stock. Earnings per share and weighted average shares outstanding have been restated to reflect the above transactions. 12 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 $5,580,242 (26%) in the nine months ended June 30, 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 NINE MONTHS ENDED JUNE 30, JUNE 30, ------------------- -------------------- REVENUES (IN THOUSANDS) 1996 1995 1996 1995 ---------------------------------------------------------------------- Interest $ 699 $ 753 $ 2,082 $ 2,307 Fees 13 - 672 903 Gains 917 1,230 2,826 1,230 ------- ------- ------- ------- $ 1,629 $ 1,983 $ 5,580 $ 4,440 During the quarter and nine months ended June 30, 1996, the Company purchased two and eight real estate loans, respectively, for a total cost of $1,262,000 and $12,062,000, respectively. During the nine months ended June 30, 1995, the Company invested $12,985,000 in five loans. All of the loans were purchased at a discount to the original face value. In addition, in the quarter and nine months ended June 30, 1996, the Company advanced a further $694,000 and $1,438,000 on prior loans compared to $508,000 and $767,000 in the similar periods of the prior year. Equipment leasing revenues arise from fees associated with managing limited partnerships in which a subsidiary of 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 nine months ended June 30, 1996 increased 13% and 2%, 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 NINE MONTHS ENDED JUNE 30, JUNE 30, ------------------- ------------------- REVENUES (IN THOUSANDS) 1996 1995 1996 1995 ----------------------------------------------------------------------- Gas $ 705 $ 610 $ 1,991 $ 1,986 Oil 191 190 468 452 PRODUCTION VOLUMES ----------------------------------------------------------------------- Gas (Mcf/day) 3,176 2,914 3,170 3,088 Oil (Bbls/day) 104 119 94 98 AVERAGE SALES PRICE ----------------------------------------------------------------------- Gas (per Mcf) $ 2.44 $ 2.30 2.29 2.36 Oil (per Bbl) 20.20 17.58 18.23 16.96 13 Natural gas production volumes in the Company's New York field of operations for the quarter and nine months increased 10% and decreased 12%, 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 7% for the nine months ended June 30, 1996 compared to the same periods of the prior year as a result of additional drilling into the Rose Run formation. The Company participated in the drilling of five successful exploratory wells and recompleted one successful developmental well during fiscal 1995 and 1996. During the first nine months 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 Real estate finance expenses decreased 63% for the quarter and 37% for the nine months ended June 30, 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 management 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. Exploration and production expenses increased $6,000 (1%) for the quarter and decreased $103,000 (8%) for the nine months ended June 30, 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. Depreciation and amortization consists primarily of amortization of oil and gas properties which, as a percentage of oil and gas revenues, decreased from 31% to 23% in the quarter and 29% to 25% in the first nine 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 $4,225,000 in cash and cash equivalents on hand at June 30, 1996. The Company's ratio of current assets to current liabilities was 8.6:1 on June 30, 1996, up from 2.9:1 at September 30, 1995. Working capital at June 30, 1996 was $6,898,000, up from $2,595,000 at September 30, 1995. Cash provided by operating activities decreased $1,599,000 in the first nine months of fiscal 1996 as compared to the prior year. This increase was the result of changes in net working capital, partially offset by an increase in net income. 14 The Company invested $12,062,000 in the acquisition of eight real estate loans and advanced $1,438,000 on existing loans held by the Company during the first nine months of fiscal 1996 as compared to the investment of $12,985,000 in the acquisition of five real estate loans and $767,000 in advances during the similar prior period. In addition, the Company sold senior participations in three loans and received proceeds upon the refinancing of three loans amounting to $16,011,000 in the first nine months of fiscal 1996. Senior participations were sold in seven loans generating $5,431,000 in cash in the similar prior period. As a result, the Company's net cash provided by investing activities increased $9,404,000 during the first nine months of fiscal 1996, as compared to the prior year. The Company's cash flow used in financing activities increased $6,375,000 during the first nine months of fiscal 1996 as compared to the prior year. During the first nine months 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 $3,883,000 in previously restricted cash. In addition, the Company resumed the payment of dividends in the fourth quarter of fiscal 1995 and paid $568,000 in dividends the first nine months 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. 15 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 June 30, 1996. 16 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 August 13, 1996 By /s/ Michael L. Staines -------------------------- --------------------------------------- Michael L. Staines Senior Vice President and Secretary Date August 13, 1996 By /s/ Nancy J. McGurk -------------------------- --------------------------------------- Nancy J. McGurk Vice President - Finance and Treasurer 17 EXHIBIT 11.1 CALCULATION OF PRIMARY AND FULLY DILUTED EARNINGS PER SHARE PRIMARY EARNINGS PER SHARE
Computation for Statement of Operations Three Months Ended Nine Months Ended Reconciliation of net income per statement of operations to amount June 30, June 30, used in primary earnings per share computation: 1996 1995 1996 1995 Net income $ 1,232,018 $ 929,337 $ 4,385,185 $ 1,802,723 Add-Interest on short-term debt, net of tax effect, on application of assumed proceeds from exercise of options and warrants in excess of 20% limitation - - - 34,098 Net income, as adjusted $ 1,232,018 $ 929,337 $ 4,385,185 $ 1,827,548 Additional Primary Computation Net income, as adjusted per primary computation above $ 1,232,018 $ 929,337 $ 4,385,185 $ 1,827,548 Additional adjustment to weighted average number of shares outstanding: Weighted average number of shares outstanding 1,893,900 1,906,000 1,889,500 1,912,100 Add-Dilutive effect of outstanding options and warrants (as determined by the application of the treasury stock method) 811,700 277,000 659,500 207,900 Weighted average number of shares outstanding 2,705,600 2,183,000 2,549,000 2,120,000 Primary earnings per share, as adjusted $ .46 $ .42 $ 1.72 $ .86 FULLY DILUTED EARNINGS PER SHARE Computation for Statement of Operations Reconciliation of net income per statement of operations to amount used in primary earnings per share computation: Income before extraordinary items $ 1,232,018 $ 929,337 $ 4,385,185 $ 1,802,723 Add-Interest on short-term debt, net of tax effect, on application of assumed proceeds from exercise of options and warrants in excess of 20% limitation - - - - Net income, as adjusted $ 1,232,018 $ 929,337 $ 4,185,185 $ 1,802,723 Additional Fully Diluted Computation Net income, as adjusted per primary computation above $ 1,232,018 $ 929,337 $ 4,385,185 $ 1,802,723 Additional adjustment to weighted average number of shares outstanding: Weighted average number of shares outstanding 1,893,900 1,906,000 1,889,500 1,912,100 Add-Dilutive effect of outstanding options and warrants (as determined by the application of the treasury stock method) 811,700 277,000 785,500 276,900 Weighted average number of shares outstanding 2,705,600 2,183,000 2,675,000 2,189,000 Fully diluted earnings per share, as adjusted $ .46 $ .42 $ 1.64 $ .82
EX-27 2
5 9-MOS SEP-30-1996 JUN-30-1996 4,224,835 0 3,088,775 0 118,674 7,809,505 27,078,545 14,735,052 42,272,194 911,401 8,478,374 0 0 20,463 30,494,956 42,272,194 2,524,663 13,449,936 1,134,098 7,281,916 0 0 642,766 6,175,185 1,790,000 4,385,185 0 0 0 4,385,185 1.72 1.64
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