UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
FORM 10-Q
(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, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d)OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-8630
AMRESCO, INC.
(Exact name of Registrant as specified in its charter)
Delaware 59-1781257
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1845 Woodall Rodgers Fwy
Dallas, Texas 75201
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code:(214) 953-7700
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 __
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
23,920,893 shares of common stock, $.05 par value per shares as of
April 30, 1995
Location of Exhibit Index: Page 16
Page 1
<PAGE>
AMRESCO, INC.
INDEX
Page No.
COVER PAGE 1
INDEX 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Condensed Balance Sheets -
March 31, 1995 and December 31, 1994 3
Consolidated Condensed Statements of Income -
Three Months Ended March 31, 1995 and 1994 4
Consolidated Condensed Statement of
Shareholders' Equity - Three Months Ended
March 31, 1995 5
Consolidated Condensed Statements of Cash
Flows - Three Months Ended March 31, 1995
and 1994 6
Notes to Consolidated Condensed
Financial Statements 7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURE 15
EXHIBIT INDEX 16
Page 2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements (Unaudited)
<TABLE>
AMRESCO, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited; dollars in thousands)
<CAPTION>
March 31, Dec. 31,
ASSETS 1995 1994
--------- ---------
<S> <C> <C>
Cash and cash equivalents $ 16,119 $ 20,446
Accounts receivable, net of reserves of
$4,787 and $4,929, respectively 10,516 20,682
Investment in asset portfolios (Note 2):
Loans 38,708 30,920
Partnerships and joint ventures 25,379 22,491
Real estate 11,233 11,171
Asset-backed securities 3,481 3,481
Deferred income taxes 16,458 17,207
Premises and equipment, net of accumulated
depreciation of $1,314 and $1,082,
respectively 4,585 4,301
Intangible assets, net of accumulated
amortization of $1,827 and $1,226,
respectively 30,098 30,668
Other assets 11,168 10,973
-------- -------
TOTAL ASSETS $167,745 $172,340
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Accounts payable $ 3,899 $ 4,891
Accrued employee compensation and
benefits 7,308 18,460
Notes payable 10,000 15,500
Nonrecourse debt (Note 2) 14,375 959
Income taxes payable 2,008 1,219
Payable to partners 2,936 3,907
Other liabilities 10,887 13,818
-------- --------
Total liabilities 51,413 58,754
-------- --------
SHAREHOLDERS' EQUITY:
Common stock, $.05 par value, authorized
50,000,000 shares; 23,830,130 and
23,592,647 shares issued in 1995 and
1994, respectively 1,192 1,180
Capital in excess of par 76,179 74,691
Reductions for employee stock (1,037) (429)
Treasury stock, $.05 par value, 24,339
shares in 1995 (160)
Retained earnings 40,158 38,144
-------- --------
Total shareholders' equity 116,332 113,586
TOTAL LIABILITIES AND SHAREHOLDERS' -------- --------
EQUITY $167,745 $172,340
======== ========
</TABLE>
See notes to consolidated financial statements.
Page 3
<PAGE>
<TABLE>
AMRESCO, INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited; dollars in thousands, except per share amounts)
<CAPTION>
Three Months Ended March 31,
1995 1994
--------- --------
<S> <C> <C>
REVENUES:
Asset management and disposition $10,833 $36,412
Earnings on asset portfolios 5,777 1,615
Mortgage banking 2,775
Other 1,455 2,536
------- -------
Total revenues 20,840 40,563
------- -------
EXPENSES:
Personnel 11,454 21,874
Occupancy 752 1,274
Equipment 465 774
Professional fees 1,155 2,921
General and administrative 972 3,794
Interest 415 654
Profit participations 291 28
-------- --------
Total expenses 15,504 31,319
-------- --------
Income from continuing operations
before taxes 5,336 9,244
Income tax expense 2,181 3,886
-------- --------
INCOME FROM CONTINUING OPERATIONS 3,155 5,358
Loss from discontinued operations,
net of $281 income tax benefit - 422
------- -------
NET INCOME $ 3,155 $ 4,936
======= =======
Earnings per share for income from
continuing operations $0.13 $0.23
Earnings per share $0.13 $0.21
Weighted average shares outstanding 24,182,827 23,266,466
See notes to consolidated financial statements.
</TABLE>
Page 4
<PAGE>
<TABLE>
AMRESCO, INC.
CONSOLIDATED CONDENSED STATEMENT OF SHAREHOLDERS' EQUITY
Three Months Ended March 31, 1995
(Unaudited; dollars in thousands, except share data)
<CAPTION>
Common Stock Capital Reductions
Number in for Total
of Excess Employee Treasury Retained Shareholders'
Shares Amount of Par Stock Stock Earnings Equity
---------- ------ ------- ------ -------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
JANUARY 1, 1995 23,592,647 $1,180 $74,691 $(429) $ - $38,144 $113,586
Exercise of stock
options 237,483 12 1,086 1,098
Tax benefits from
employee stock
compensation 402 402
Settlement of
notes receivable
for officers'
shares with
common stock
(14,339 shares) 89 (89) -
Acquisition of
treasury stock
(10,000 shares) (71) (71)
Unearned stock
compensation (697) (697)
Dividends declared
($.05 per share) (1,191) (1,191)
Foreign currency
translation
adjustments 50 50
Net income 3,155 3,155
---------- ------ ------- ------- ----- ------- ------
MARCH 31, 1995 23,830,130 $1,192 $76,179 $(1,037) $(160) $40,158 $116,332
========== ====== ======= ======= ===== ======= ========
</TABLE>
See notes to consolidated financial statements.
Page 5
<PAGE>
<TABLE>
AMRESCO, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited; dollars in thousands)
<CAPTION>
Three Months Ended March 31,
1995 1994
--------- --------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 3,155 $ 4,936
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 842 735
Deferred tax provision 749 1,292
Increase (decrease) in cash for changes
in:
Accounts receivable 10,166 8,731
Other assets (226) (1,545)
Accounts payable (992) (6,136)
Income taxes payable 789 (541)
Other liabilities (15,015) (11,063)
-------- --------
Net cash used in operating activities (532) (3,591)
-------- --------
INVESTING ACTIVITIES:
Purchase of asset portfolios (21,833) (7,099)
Collections on asset portfolios, net 11,095 4,518
Proceeds from sale of subsidiary 1,385
Purchase of premises and equipment (525) (88)
-------- --------
Net cash used in investing activities (11,263) (1,284)
-------- --------
FINANCING ACTIVITIES:
Proceeds from notes payable and
subordinated debt 28,575 4,394
Repayment of notes payable and
subordinated debt (20,659) (2,806)
Stock options exercised 401 481
Tax benefit of stock options exercised 402 1,054
Dividends paid (1,180)
Purchase of treasury stock (71)
Repayment of notes receivable for
officers' shares 131
-------- --------
Net cash provided by financing activities 7,468 3,254
-------- --------
Net decrease in cash and cash equivalents (4,327) (1,621)
Cash and cash equivalents, beginning of period 20,446 43,442
-------- --------
Cash and cash equivalents, end of period $ 16,119 $ 41,821
======== ========
SUPPLEMENTAL DISCLOSURE:
Income taxes paid $442 $ -
Interest paid 641 529
Common stock issued for unearned stock
compensation 697
Notes receivable received in connection with
sale of subsidiary 750
</TABLE>
See notes to consolidated financial statements.
Page 6
<PAGE>
AMRESCO, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS MARCH 31, 1995
(UNAUDITED)
1. Basis of Presentation
The accompanying unaudited consolidated condensed financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to
Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include
all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the three month period ended March 31, 1995, are not necessarily
indicative of the results that may be expected for AMRESCO, INC.'s (the
"Company") fiscal year or any other interim period. For further information,
refer to the consolidated financial statements and footnotes thereto included
in the Company's Annual Report on Form 10-K for the year ended December 31,
1994.
Certain reclassifications of prior year amounts have been made to
conform to the current year presentation.
2. Banking Arrangements
On March 20, 1995, a wholly-owned subsidiary of the Company entered into
a $15,375,050 nonrecourse term loan agreement with NationsBank of Texas, N.A.
(the "Bank"). The loan is collateralized by a security interest in
certain of the investments in asset portfolios. The stated interest rate for
this debt is the Bank's floating prime rate plus 1-1/2% (10-1/2% at March 31,
1995); however, the Company may elect to have up to three traunches of debt
bear interest at adjusted LIBOR rate plus 3% (9-1/2% at March 31, 1995 for
a term of 180 days), with the term of each traunche to be up to 180 days.
Interest is payable monthly. Principal payments are due monthly and are
equal to 90% of the net portfolio cash flow for the preceding month.
Additional principal reductions may be required on a quarterly basis to meet
minimum principal payment requirements. The loan is nonrecourse to the
borrowing entity and the Company. As part of the agreement, the borrowing
entity and the Company are subject to both positive and negative covenants.
On January 20, 1995, the Company entered into a $35,000,000 revolving
investment loan agreement with the Bank. Proceeds of the loan are used to
acquire short-term investments such as Treasury securities and other cash
equivalents which secure the loan. Interest is computed based on market
rates adjusted for the Company's available funds at the Bank. No balance
was outstanding under this agreement at March 31, 1995.
On April 28, 1995, a wholly-owned subsidiary of the Company entered
into a $25,000,000 revolving credit loan agreement with the Bank to
facilitate mortgage loan underwriting and origination. The stated interest
rate for this line is the Bank's floating prime rate (9% at March 31, 1995);
however, the Company may elect to have up to three traunches of debt bear
interest at adjusted 30-day LIBOR rate plus 2% (8-1/8% at March 31, 1995 for
a term of 30 days), and interest is payable monthly. Principal payments on
the note are due monthly, and are equal to the aggregate amount of all
principal payments received by the borrowing entity with respect to mortgage
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loan underwriting and origination. The loan is collateralized by the mortgage
loans and the borrowing entity/servicers collection accounts.
3. Discontinued Operations
On May 5, 1995, the Company signed a definitive agreement to sell
substantially all of the assets of its home banking and data processing
subsidiary, AMRESCO Services, Inc., in an all cash transaction for an
estimated gain of approximately $2,600,000, or $0.11 per share, subject to
final closing. The transaction is expected to close in June 1995. The
Company adopted a plan on December 1, 1994, to sell the subsidiary by
June 30, 1995. The net assets intended for sale at March 31, 1995, are as
follows (in thousands):
<TABLE>
<S> <C>
Cash $ 11
Accounts receivable 555
Premises and equipment 311
Other assets 40
Liabilities (102)
Reserve for losses on
discontinued operations (624)
-----
Net assets of discontinued subsidiary $ 191
=====
</TABLE>
4. Allowance for Loan Losses
As of January 1, 1995, the Company adopted the provisions of Statement
of Financial Standards ("SFAS") No. 114 "Accounting by Creditors for
Impairment of a Loan" as amended by SFAS 118. The adoption of SFAS 114 had
no material impact on the Company's financial statements. SFAS 114
addresses the accounting by creditors for impairment of loans. SFAS 114
requires that the allowance for possible loan loss on impaired loans be
measured based on the present value of expected future cash flows
discounted at the loan's effective interest rate or, as a practical
expedient, at the loan's observable market price or the fair value of the
collateral if the loan is collateral dependent. As the measurement of the
allowance for possible loan losses changes, the change is reported as a
provision for possible loan losses in the same manner in which the
impairment initially was recognized or as a reduction in the amount of
provision for possible loan losses that otherwise would be reported.
As of March 31, 1995, no allowance for loan losses was required for the
Company's loans.
Page 8
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
General
AMRESCO, INC. (the "Company") is one of the largest independent
providers of asset management and disposition services for nonperforming and
underperforming assets held by private investors and financial institutions.
The Company provides other ancillary services, such as marketing of troubled
assets. The Company also performs commercial mortgage banking activities,
including commercial mortgage loan origination and loan servicing. The
Company intends to continue to build upon this base of experience to seek new
business as an asset manager and consultant and expand its commercial
mortgage banking activities.
The Company performs portfolio evaluations for clients seeking to invest
capital in nonperforming and underperforming assets. Substantially all of
such clients request that the Company purchase an equity stake in the
purchased assets, and then provide the asset management staff to perform
management and disposition services for a fee. The Company is in a strong
position to pursue such opportunities due to its current financial and human
resources.
During the third quarter of 1994, the Company acquired substantially all
of the assets of Holliday Fenoglio Dockerty & Gibson, Inc. and certain of its
affiliates ("Holliday Fenoglio"), which are originators and servicers of
commercial mortgage loans, for a maximum of approximately $33.0 million based
upon an initial payment of $17.3 million in cash and $4.3 million in stock
and three additional annual payments contingent upon future financial
performance. In April of 1995, the first of these annual payments was made
totaling $3.8 million which consisted of 80% cash and 20% stock. The
operations of Holliday Fenoglio have been included in the Company's financial
statements from August 1, 1994, the effective date of the acquisition. Also
during 1994, the Company started operations of AMRESCO Capital Corporation, a
real estate capital markets subsidiary.
On December 1, 1994, the Company elected to dispose of the operations
of AMRESCO Services, Inc., its data processing and home banking subsidiary,
in order to concentrate efforts in the Company's primary lines of business.
For 1994, the loss from such discontinued operations totaled $2.2 million, or
$.09 per share. On May 5, 1995, the Company signed a definitive agreement to
sell substantially all of the assets AMRESCO Services, Inc. in an all cash
transaction which is expected to close in June, 1995, for an estimated gain
of approximately $2.6 million, or $0.11 per share, subject to final closing.
On May 5, 1995, AMRESCO Capital Corporation signed a definitive
agreement to acquire CKSRS Housing Group, Ltd., a Miami, Florida-based
commercial mortgage banking company specializing in the origination, sale and
servicing of multifamily mortgages in Florida. The transaction is expected
to close by June 1, 1995.
During 1994 and the first quarter of 1995, the Company entered into
asset management contracts covering approximately $2 billion and $200
million, respectively, in assets, however, during the latter part of 1994 and
the early part of 1995, asset management contracts which generated
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approximately 54% and 76% of the Company's revenues and pre-tax income for
1994, respectively, concluded. The Company's strategy is to generate
additional revenues and earnings during 1995 through substantially increased
investments in wholly-owned asset portfolios, the expansion of its commercial
mortgage banking operations, its entering into new asset management
contracts, the receipt of incentive fees from existing asset management
contracts and the acquisitions of other businesses. Because of the
uncertainty of the timing and success of such efforts, no assurances can be
given that the planned additional revenues and earnings will be generated
during 1995. In addition, the magnitude of such efforts will be governed to
some extent by the availability of capital. See "Liquidity and Capital
Resources."
Asset management and disposition contracts are of a finite duration,
typically 3-5 years. Unless new assets are added to these contracts during
their terms, the amount of total assets under management decreases over the
terms of these contracts. During the first quarter of 1995, the asset
management contract with the Federal Deposit Insurance Corporation ("FDIC")
concluded. During 1994, all the existing management contracts with the
Resolution Trust Company ("RTC") expired. On August 31, 1994, the Company
and NationsBank Corporation concluded their asset management contract (the
"NationsBank Contract"). The NationsBank Contract had an original term
expiring in June 1997. The Company received an early conclusion fee of $10
million. The proceeds from the fee, net of expenses associated with the
conclusion, resulted in a one-time increase of $.15 per share in the third
quarter of 1994.
Due to the expiration of the RTC contracts and the winding down of the
FDIC contract during 1994 and early 1995, as well as the conclusion of the
NationsBank Contract, there was a substantial reduction in staff providing
asset management services during 1994 and further reductions occurred during
the first quarter of 1995. Severance costs were accrued at December 31,
1994.
Additionally, as a result of the expiration of the RTC contracts and the
winding down of the FDIC contract, as well as conclusion of the NationsBank
Contract, lower levels of revenue and income were recognized in the first
quarter of 1995 than was previously reported during the other quarters of
1994.
The following discussion and analysis presents the significant changes
in the financial condition and results of continuing operations of the
Company for the quarter ended March 31, 1995. This discussion should be read
in conjunction with the unaudited financial statements and notes to the
unaudited financial statements included elsewhere in this report. The
operations of acquired businesses are included in the financial statements
from the date of acquisition.
Page 10
<PAGE>
The following results for the fourth quarter of 1994 are discussed
along with the first quarter results in order to show additional trend
analysis due to the transitional nature of the Company's business (in
thousands).
<TABLE>
<CAPTION>
Three Months Ended
March 31, Dec. 31, March 31,
1995 1994 1994
-------- -------- --------
<S> <C> <C> <C>
REVENUES:
Management fees $ 5,125 $ 4,523 $ 9,012
Disposition fees 5,045 7,486 23,746
Contract rebates (2,252)
Earnings on asset portfolios 5,777 4,656 1,615
Mortgage banking 2,775 4,209
Other 1,455 1,095 2,536
-------- ------- -------
Total revenues before assistance
revenue 20,177 21,969 34,657
Assistance revenue 663 7,410 5,906
-------- ------- -------
Total revenues 20,840 29,379 40,563
-------- ------- -------
EXPENSES:
Personnel 10,506 13,317 17,877
Other general and
administrative 4,044 6,356 7,508
Profit participations 291 140 28
------- ------- -------
Total expenses before
reimbursable costs 14,841 19,813 25,413
Reimbursable costs 663 7,410 5,906
-------- ------- -------
Total expenses 15,504 27,223 31,319
Income from continuing
operations before taxes 5,336 2,156 9,244
Income tax expense on continuing
operations 2,181 879 3,886
-------- ------- -------
INCOME FROM CONTINUING OPERATIONS 3,155 1,277 5,358
-------- ------- -------
Discontinued operations -
Loss from operations, net of 311 422
income tax benefit
Loss on disposal of AMRESCO
Services, Inc., net of
tax benefit 898
-------- ------- -------
Loss from discontinued operations - 1,209 422
-------- ------- -------
NET INCOME $ 3,155 $ 68 $ 4,936
======== ======= =======
</TABLE>
Results of Operations
Revenue for the Company's asset management services for private parties
and for government contracts was based on the contract value of assets
managed and the Company's success in disposing of such assets. The asset base
of each contract generally declines over the life of the contract, thus
reducing management fees payable thereunder. Disposition fees, earned over
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<PAGE>
the life of the contract, are subject to fluctuation based on the
consideration received, timing of the sale or collection of the managed
assets and reaching specified earnings on behalf of partners. Certain
direct costs incurred in the management of assets for the FDIC were paid by
the Company and billed to the FDIC. Such costs were included in reimbursable
costs and the related payment by the FDIC was included in assistance revenue.
Such costs fluctuate based on the amount and nature of the assets currently
managed, the seasonal timing of property tax payments and the timing of asset
dispositions. Such costs did not effect net income, other than the costs of
such advanced funds, but at times required sizable capital resources until
reimbursed by the FDIC.
Revenue from the Company's commercial mortgage banking activities is
derived from the origination of commercial mortgage loans, the placement of
such loans with permanent investors and the subsequent servicing of loans.
Loan placement and servicing fees, commitment fees and real estate
brokerage commissions, are recognized as earned. Placement and servicing
expenses are charged to expense as incurred.
Three Months Ended March 31, 1995 Compared to Three Months Ended
December 31, 1994
Revenues-- Revenues before assistance revenue for the 1995 first quarter
were $20.2 million compared to $22.0 million for the 1994 fourth quarter.
Revenues before assistance revenue for the 1995 first quarter compared to the
previous quarter reflected a $1.1 million increase in earnings on asset
portfolios due to an increase in investments in asset portfolios. These
increases more than were offset by a decrease in disposition fees of $2.4
million from reduced revenues on government sector contracts as these
contracts concluded and a decrease in mortgage banking revenues of $1.4
million due to fewer loan originations. Assistance revenue and its offsetting
reimbursable costs declined in the first quarter of 1995 due to the
conclusion of the FDIC contract during the quarter.
Expenses-- Total expenses before reimbursable costs decreased $5.0
million in the first quarter of 1995 compared to the previous quarter.
Personnel expenses in the first quarter of 1995 declined $2.8 million
compared to the previous quarter primarily due to $2.0 million of severance
costs recorded in the fourth quarter for corporate downsizing and to the
government sector contracts concluding. Other general and administrative
expenses decreased primarily due to one-time expenses, such as relocation and
travel expenses, recorded in the fourth quarter of 1994.
Income Taxes-- The Company must have future taxable income to realize
recorded deferred tax assets, including net operating loss carryforward tax
benefits obtained in the acquisition of BEI Holdings, Ltd. ("BEI"). Certain
of these benefits expire beginning in 1995 and are subject to annual
utilization limitations. Management believes that recorded deferred tax
assets will be realized in the normal course of business.
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<PAGE>
Three Months Ended March 31, 1995 Compared to Three Months Ended
March 31, 1994
Revenues-- Revenues before assistance revenue for the 1995 first quarter
compared to the 1994 first quarter reflected a $3.9 million decrease in
management fees and a $16.4 million decrease in disposition fees, net of
contract rebates. The year ago quarter included revenues from the
NationsBank Contract that concluded during the third quarter of 1994 for
which the Company received an early conclusion fee of $10.0 million in
August, 1994. The decreases also resulted from reduced revenues from
government sector contracts as these contracts concluded. Other revenues
decreased $1.1 million due to the inclusion in the first quarter of 1994 of
consulting revenue related to the BEI EnterChange subsidiaries prior to their
sale in the first quarter of 1994. These decreases were partially offset by
earnings from asset portfolios, which increased $4.2 million due to a
significant increase in investments in asset portfolios, and from mortgage
banking revenue, which increased $2.8 million, due to the inclusion of
Holliday Fenoglio, Inc., which was purchased in August 1994.
Expenses-- Total expenses before reimbursable costs decreased $10.6
million in the first quarter of 1995 compared to the first quarter of 1994.
The year ago quarter included expenses for the NationsBank Contract that
concluded in the third quarter of 1994 and for government sector contracts
that were concluding during 1994. Also, the decrease in expenses compared to
the year ago quarter reflected the corporate downsizing initiatives that
began in the fourth quarter of 1994.
Liquidity and Capital Resources
The Company generates cash for operating requirements primarily from
fees from the management, servicing and disposition of assets, earnings on
asset portfolios and with advances from bank credit facilities. Cash flows
are generated primarily from earnings as well as from collections on asset
portfolios. For the first quarter of 1995, cash flow was approximately
$21 million including net income of $3 million and gross cash collections on
portfolios of $18 million. Management expects cash flow to increase
substantially in 1995 compared to 1994, primarily as a result of collections
on wholly-owned asset portfolios.
On November 2, 1994, the Company entered into a $50 million revolving
line of credit agreement with NationsBank of Texas, N.A. (the "Bank"), which
matures and is payable in full on April 30, 1996. There was a balance of
$8.0 million at 8-3/8% and $2.0 million at 9%, for a total of $10.0 million
outstanding, under such facility at March 31, 1995. The Company has
outstanding letters of credit totaling $.5 million at March 31, 1995, which
reduce the available revolving line.
On January 20, 1995, the Company entered into a $35.0 million revolving
investment loan agreement with the Bank. Proceeds of the loan are used to
acquire short-term investments which secure the loan. Interest is computed
based on market rates adjusted for the Company's available funds at the Bank.
No balance was outstanding under this agreement at March 31, 1995.
During March 1995, the Company entered into a nonrecourse debt
agreement for $15.5 million to support wholly-owned asset purchases. This
nonrecourse debt has an interest rate of the Bank's prime rate plus 1-1/2%
and/or LIBOR plus 3.0%. There was a balance outstanding at March 31, 1995,
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of $14.4 million under this nonrecourse debt agreement, $7.0 million at 9
1/8%, $4.0 million at 9-1/4% and $3.4 million at 10-1/2%.
On April 28, 1995, AMRESCO Capital Corporation, a subsidiary of the
Company, entered into a warehouse line of credit agreement with the Bank for
$25 million to support its commercial mortgage financing. The rate of
interest on advances is to be, as selected by the Company, tied to either
the Bank's floating prime rate or a rate equal to an adjusted LIBOR rate
plus 200 basis points.
During February 1995, the Company's Board of Directors authorized the
repurchase of up to $6 million of its common stock from time to time through
February 6, 1996. Any purchases, if made, would be in the open market at
prevailing prices or in privately negotiated transactions. The repurchased
shares would be held for existing or future stock option or employee benefit
plans, and for possible stock splits or dividends. During the first quarter
of 1995, 10,000 shares were repurchased.
Accounts receivable decreased from $20.7 million at December 31, 1994,
to $11.1 million at March 31, 1995, due to the conclusion and expiration of
certain asset management contracts.
The Company periodically assesses the recoverability of intangible
assets and estimates the remaining useful life by reviewing projected results
of acquired operations, servicing rights and contracts.
The Company intends to pursue additional opportunities in 1995 in
asset acquisitions, both by acquiring assets for its own account and by
serving as an investor with various capital partners who acquire such assets,
and acquisitions of new businesses and expansion of current businesses. The
funds for such acquisitions and investments will be provided in 1995 by cash
flows and borrowings under the Company's revolving line of credit and
possibly additional lines of credit. As a result, interest expense in 1995
will be higher than the interest expense in 1994.
The Company believes that its funds on hand of $16.1 million at March
31, 1995, cash flow from operations, its unused borrowing capacity under its
credit lines and ability to obtain other credit lines should be sufficient to
meet its anticipated operating needs and capital expenditures, as well as
planned new acquisitions and investments, for at least the next twelve
months. The magnitude of the Company's acquisition and investment program
will be governed to some extent by the availability of such capital.
Page 14
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits as required by Item 601 of Regulation S-K are set forth
on the Exhibit Index at page 16.
(b) None
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.
AMRESCO, INC. Registrant
Date: May 12, 1995 By: /S/Barry L. Edwards
Barry L. Edwards
Executive Vice President,
Treasurer, and
Chief Financial Officer
Page 15
<PAGE>
EXHIBIT INDEX
Page #
11. Computation of Per Share Earnings 17
27. Financial Data Schedule 18
Page 16
<PAGE>
AMRESCO, INC.
EXHIBIT 11 - COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Three Months Ended March 31,
1995 1994
---------- ----------
<S> <C> <C>
Net income $3,155,000 $4,936,000
Primary
Weighted average shares outstanding 23,706,900 22,451,754
Net effect of dilutive stock options
based on the Treasury stock method
using average market price 475,927 814,712
---------- ----------
Total 24,182,827 23,266,466
========== ==========
Earnings per share $0.13 $0.21
========== ==========
Fully diluted (a)
Weighted average shares outstanding 23,706,900 22,451,791
Net effect of dilutive stock options
based on the Treasury stock method
using the higher of average or ending
market price 531,902 830,345
---------- ----------
Total 24,238,802 23,282,136
========== ==========
Earnings per share $0.13 $0.21
========== ==========
</TABLE>
(a) Fully diluted earnings per share is not presented for any period in
the financial statements as it is less than 3% dilutive and is, therefore,
not required to be shown under Accounting Principles Board Opinion No. 15.
Page 17
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
AMRESCO, INC. March 31, 1995, 10-Q and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> $16,119
<SECURITIES> 0
<RECEIVABLES> 15,303
<ALLOWANCES> (4,787)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 5,899
<DEPRECIATION> (1,314)
<TOTAL-ASSETS> 167,745
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 1,192
0
0
<OTHER-SE> 115,140
<TOTAL-LIABILITY-AND-EQUITY> 167,745
<SALES> 0
<TOTAL-REVENUES> 20,840
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 15,089
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 415
<INCOME-PRETAX> 5,336
<INCOME-TAX> 2,181
<INCOME-CONTINUING> 3,155
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,155
<EPS-PRIMARY> $0.13
<EPS-DILUTED> 0
</TABLE>
