<PAGE>
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 September 30, 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 offices) (Zip Code)
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:
24,169,125 shares of common stock, $.05 par value per share, as of October
20, 1995.
Location of Exhibit Index: Page 19
Page 1
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AMRESCO, INC.
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
COVER PAGE 1
INDEX 2
PART I. FINANCIAL INFORMATION
---------------------
Item 1. Financial Statements (Unaudited)
Consolidated Condensed Balance Sheets - September 30, 1995 and 3
December 31, 1994
Consolidated Condensed Statements of Income - Three and Nine Months
Ended September 30, 1995 and 1994 4
Consolidated Condensed Statement of Shareholders' Equity - Nine
Months Ended September 30, 1995 5
Consolidated Condensed Statements of Cash Flows - Nine Months
Ended September 30, 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 10
PART II. OTHER INFORMATION
-----------------
Item 6. Exhibits and Reports on Form 8-K 18
SIGNATURE 18
EXHIBIT INDEX 19
</TABLE>
Page 2
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------
AMRESCO, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED; DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
September 30, December 31,
ASSETS 1995 1994
------------- ------------
<S> <C> <C>
Cash and cash equivalents $ 12,720 $ 20,446
Investment securities 27,222
Accounts receivable, net of reserves of
$2,641 and $4,929, respectively 7,657 20,682
Mortgage loans held for sale (Note 2) 6,042
Investment in asset portfolios (Note 2):
Loans 114,676 30,920
Partnerships and joint ventures 30,052 22,491
Real estate 11,046 14,054
Asset-backed securities 19,982 3,481
Deferred income taxes 12,810 17,207
Premises and equipment, net of accumulated
depreciation of $1,781 and $1,082,
respectively 5,119 4,301
Intangible assets, net of accumulated
amortization of $3,056 and $1,226,
respectively 30,377 30,668
Other assets 13,379 8,090
-------- --------
TOTAL ASSETS $291,082 $172,340
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Accounts payable $ 4,307 $ 4,891
Accrued employee compensation and benefits 8,524 18,460
Notes payable (Note 2) 104,222 15,500
Mortgage warehouse debt (Note 2) 5,693
Nonrecourse debt (Note 2) 30,605 959
Income taxes payable 1,329 1,219
Payable to partners 950 3,907
Other liabilities 6,428 13,818
-------- --------
Total liabilities 162,058 58,754
-------- --------
SHAREHOLDERS' EQUITY:
Common stock, $0.05 par value, authorized
50,000,000 shares; 24,193,464 and
23,592,647 shares issued in 1995 and
1994, respectively 1,210 1,180
Capital in excess of par 78,790 74,691
Reductions for employee stock (620) (429)
Treasury stock, $0.05 par value, 24,339
shares in 1995 (160)
Retained earnings (Note 2) 49,804 38,144
-------- --------
Total shareholders' equity 129,024 113,586
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $291,082 $172,340
======== ========
</TABLE>
SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
Page 3
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AMRESCO, INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED; DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ -------------------------
1995 1994 1995 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUES:
Asset management and resolution fees $ 8,310 $28,879 $27,278 $101,221
Asset portfolio income 10,030 4,177 23,662 8,433
Mortgage banking fees 5,753 1,967 14,077 1,967
Other revenues 1,323 11,759 4,585 16,184
---------- ---------- ---------- ----------
Total revenues 25,416 46,782 69,602 127,805
---------- ---------- ---------- -----------
EXPENSES:
Personnel 13,566 20,508 36,827 62,268
Occupancy 600 901 1,903 3,106
Equipment 563 581 1,580 1,978
Professional fees 466 2,745 2,359 9,156
General and administrative 214 6,816 3,745 16,136
Interest 1,493 387 2,771 1,696
Profit participations 84 (135) 446 (65)
---------- ---------- ---------- -----------
Total expenses 16,986 31,803 49,631 94,275
---------- ---------- ---------- -----------
Income from continuing operations before taxes 8,430 14,979 19,971 33,530
Income tax expense 3,234 6,106 7,541 13,874
---------- ---------- ---------- -----------
INCOME FROM CONTINUING OPERATIONS 5,196 8,873 12,430 19,656
Loss from discontinued operations, net of $159
and $651 income tax benefit, respectively (238) (976)
Gain from sale of discontinued operations, net of
$1,617 income tax expense 2,425
---------- ---------- ---------- ----------
NET INCOME $ 5,196 $ 8,635 $14,855 $ 18,680
========== ========== ========== ==========
Earnings per share for income from
continuing operations $0.21 $0.37 $0.51 $0.83
========== ========== ========== ==========
Earnings per share $0.21 $0.36 $0.61 $0.79
========== ========== ========== ==========
Weighted average shares outstanding 24,677,789 23,877,199 24,429,822 23,515,800
========== ========== ========== ==========
</TABLE>
SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
Page 4
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AMRESCO, INC.
CONSOLIDATED CONDENSED STATEMENT OF SHAREHOLDERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 1995
(UNAUDITED; DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
Common Stock Reductions
----------------- Capital for Total
Number of Excess of Employee Treasury Retained Shareholders'
Shares Amount 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 394,480 20 1,146 1,166
Issuance of common stock for
acquired company earnout 112,002 5 772 777
Issuance of common stock for
unearned stock compensation 94,335 5 644 (649) --
Amortization of unearned stock
compensation 149 149
Tax benefits from employee stock
compensation 1,537 1,537
Repayment of notes receivable for
officer's shares 220 220
Settlement of notes receivable for
officers' shares with common
stock (14,339 shares) 89 (89) --
Acquisition of treasury stock
(10,000 shares) (71) (71)
Dividends paid ($0.05 per
share) (2,398) (2,398)
Dividends declared ($0.05 per
share) (1,208) (1,208)
Foreign currency translation
adjustments 155 155
Unrealized gain on securities
available for sale 256 256
Net income 14,855 14,855
---------- ------ ------- ----- ----- ------- --------
SEPTEMBER 30, 1995 24,193,464 $1,210 $78,790 $(620) $(160) $49,804 $129,024
========== ====== ======= ===== ===== ======= ========
</TABLE>
SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
Page 5
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AMRESCO, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED; DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
---------------------
1995 1994
--------- --------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 14,855 $ 18,680
Adjustments to reconcile net income to net
cash provided by operating activities:
Gain on sale of discontinued operation (2,425)
Depreciation and amortization 2,694 2,198
Write-off of intangible related to
contract conclusion 2,827
Deferred tax provision 4,397 2,705
Loss on disposition of premises and
equipment 78 692
Employee stock compensation 149
Increase (decrease) in cash for changes in:
Accounts receivable 13,025 20,468
Other assets (3,894) 3,484
Accounts payable (630) (6,614)
Income taxes payable (1,507) 3,191
Other liabilities (21,588) (2,782)
--------- --------
Net cash provided by operating
activities 5,154 44,849
--------- --------
INVESTING ACTIVITIES:
Purchase of investment securities (27,222)
Loans originated or purchased (7,767)
Purchase of asset portfolios (139,123) (33,196)
Collections on asset portfolios 34,569 23,175
Proceeds from sale of subsidiaries 6,250 1,385
Purchase of subsidiaries (1,295) (17,830)
Purchase of premises and equipment (1,627) (2,091)
--------- --------
Net cash used in investing activities (136,215) (28,557)
--------- --------
FINANCING ACTIVITIES:
Proceeds from notes payable, mortgage
warehouse debt and nonrecourse debt 238,048 4,394
Repayment of notes payable, mortgage
warehouse debt and nonrecourse debt (113,987) (23,340)
Stock options exercised 1,166 1,381
Tax benefit of employee stock compensation 1,537 1,652
Dividends paid (3,578) (2,266)
Acquisition of treasury stock (71)
Repayment of notes receivable for
officers' shares 220 178
--------- --------
Net cash provided by (used in)
financing activities 123,335 (18,001)
--------- --------
Net decrease in cash and cash equivalents (7,726) (1,709)
Cash and cash equivalents, beginning of
period 20,446 43,442
--------- --------
Cash and cash equivalents, end of period $ 12,720 $ 41,733
========= ========
SUPPLEMENTAL DISCLOSURE:
Income taxes paid $2,990 $3,619
Interest paid 2,912 1,466
Common stock issued for purchase
subsidiary 777 4,320
Common stock issued for unearned stock
compensation 649
Settlement of notes receivable for
officers' shares with common stock 89
Notes receivable received in connection
with sale of subsidiary 818
</TABLE>
SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
Page 6
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AMRESCO, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements
of AMRESCO, INC. and subsidiaries (the "Company") 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 and nine
month periods ended September 30, 1995, are not necessarily indicative of the
results that may be expected for the entire 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 period amounts have been made to conform to the current period
presentation.
MORTGAGE BANKING ACTIVITIES - Mortgage loans held for sale are carried
at the lower of cost or market. Market is determined on an individual loan
basis based upon the estimated fair value of similar loans for the month of
expected delivery.
Statement of Financial Accounting Standards ("SFAS") No. 122,
"Accounting for Mortgage Servicing Rights" (an amendment of SFAS No. 65),
which is effective for the fiscal year 1996, requires mortgage banking
enterprises to recognize as separate assets rights to service mortgage loans
for others, whether such rights are originated by the Company's own mortgage
banking activities or purchased from others. The Company will adopt SFAS No.
122 effective January 1, 1996, and expects that the impact of such adoption
will be insignificant to its financial condition and results of operations.
INVESTMENT SECURITIES - Investment Securities consist of short-term
investments such as Treasury bills, Federal agency securities and commercial
paper with a maturity of three months or less. The Company has the intent
and ability to hold these investments to maturity and are carried at
amortized cost. Because of the short maturities, cost estimates fair value.
All investment securities are pledged as collateral under the investment loan
agreement.
2. BANKING ARRANGEMENTS
On September 29, 1995, the Company entered into the $175,000,000
revolving loan agreement with a syndicate of banks led by NationsBank of
Texas, N.A. (the "Bank) which matures and is payable in full on September 29,
1997. By its terms, the revolving loan agreement has two components,
$75,000,000 (including $25,000,000 under a temporary bridge facility)
available under a corporate facility and $100,000,000 available under a
portfolio facility. The banks' current commitment under the facility is
limited to a total of $127,500,000; $68,900,000 (including $25,000,000 under
a temporary bridge facility) under the corporate facility and $58,600,000
under the portfolio facility. The additional amounts under the revolving
loan agreement would become available to the Company upon the participation
Page 7
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by additional financial institutions in the syndicate for the loan and upon
an increase in the Company's borrowing base under this agreement. There can
be no assurance that such events will occur. The borrowing terms, including
interest, may be selected by the Company and tied to either the Bank's
variable rate (8-3/4% at September 30, 1995) or, for advances on a term
basis up to approximately 180 days, a rate equal to an adjusted LIBOR rate
(7-5/8% at September 30, 1995 for a term of 30 days). On September 7, 1995,
the Company entered into an interest rate swap agreement to hedge a portion
of this debt agreement. The swap agreement has a notional amount of
$25,000,000 and requires payment of interest by the Company at a fixed rate
of 5-4/5% and receipt of interest by the Company at a floating rate equal to
30-day LIBOR.
The revolving loan agreement is secured by substantially all of the
assets of the Company not pledged under other credit facilities, including
stock of a majority of the Company's subsidiaries held by the Company. The
revolving loan agreement requires the Company to meet certain financial
tests, including minimum consolidated tangible net worth, maximum
consolidated funded debt to consolidated capitalization ratio, minimum fixed
charge coverage ratio, minimum interest coverage ratio, maximum consolidated
funded debt to consolidated earnings before interest, taxes, depreciation and
amortization ("EBITDA") ratio and maximum corporate facility outstanding to
consolidated EBITDA ratio. The revolving loan agreement contains covenants
that, among other thing, will limit the incurrence of additional
indebtedness, investments, asset sales, loans to shareholders, dividends,
transactions with affiliates, acquisitions, mergers and consolidations, liens
and encumbrances and other matters customarily restricted in such agreements.
Prior to entering into the revolving credit agreement described above,
the Company maintained a $75,000,000 line of credit with the Bank which bore
interest at the Bank's floating prime rate or an adjusted LIBOR rate plus 150
basis points. This line of credit was terminated with the new loan agreement.
On August 15, 1995, a wholly-owned subsidiary of the Company entered
into a warehouse line of credit agreement with a funding corporation to
facilitate multi-family mortgage loan underwriting and origination. The
stated interest rate for this line is an adjusted 30-day LIBOR rate plus 3%
(8-33/50% at September 30, 1995), and interest and principal are payable upon
the receipt of the proceeds of the sale or other disposition of related
mortgage loans. The loan is secured by the mortgage loans originated by the
Company and held for sale under the facility. The Company is a guarantor on
this facility.
On September 27, 1995, a wholly-owned subsidiary of the Company entered
into a $8,696,000 Global Master Repurchase Agreement to support the purchase
of certain commercial mortgage pass-through certificates. The Agreement bears
interest at a rate based on LIBOR (7-3/8% at September 30, 1995) payable
monthly. This facility is secured by the commercial mortgage pass-through
certificates and repayment of principal is based on cash flow from such
securities.
3. 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. As of September 30, 1995, no
allowance for loan losses was required for the Company's loans.
Page 8
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4. ACQUISITIONS
On September 13, 1995, the Company signed a definitive agreement to
acquire from EQ Services, Inc. and Equitable Real Estate Investment
Management, Inc. 30 contracts to service a total of approximately
$6,200,000,000 in commercial real estate mortgages. The closing of the
transaction is subject to the satisfaction of certain customary conditions.
On October 11, 1995, the Company signed a definitive agreement to
acquire from Acacia Realty Advisors, Inc. 16 pension fund advisory contracts.
The closing of the transaction is subject to the satisfaction of certain
customary conditions.
Page 9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
AMRESCO, INC. (the "Company" or "AMRESCO") is a leading specialty
financial services company engaged primarily in the business of portfolio
acquisitions, asset management and resolution, loan origination/underwriting
and loan servicing. Historically, asset management and resolution services
have been AMRESCO's primary business; however, the asset resolution industry
is fundamentally changing. In conjunction with this industry change, new
markets for the Company's asset management services have been developing, and
AMRESCO is building on its existing strengths to be a significant competitor
in these markets.
The Company's strategic objectives include the continued acquisition of
loan portfolios and generation of new asset management contracts. The
primary factors affecting AMRESCO's asset acquisition and resolution business
are the availability of acquisition opportunities and the Company's ability
to favorably price its acquisitions. During the first, second and third
quarters of 1995, the Company entered into asset management contracts
covering assets of approximately $200 million, $500 million and $750 million,
respectively.
Additionally, the Company plans on further expanding its mortgage
banking presence through additional services, targeted branch openings and
potential strategic acquisitions. 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 were 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 comprised 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 ("ACC"), a full service commercial
mortgage company providing commercial real estate financing directly, through
relationships with various independent mortgage companies and strategic
alliances with investment banks. Effective June 30, 1995, ACC acquired
substantially all of the assets of CKSRS Housing Group, Ltd., a Miami,
Florida-based commercial mortgage banking limited partnership specializing in
the origination, sale and servicing of multifamily mortgages in Florida, for
approximately $1.3 million.
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,
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."
Page 10
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RECENT EVENTS
On October 11, 1995, the Company signed a definitive agreement with
Acacia Realty Advisors, Inc. to acquire 16 pension fund advisory contracts.
The closing of the transaction is subject to the satisfaction of certain
customary conditions.
On September 13, 1995, the Company signed a definitive agreement to
acquire from EQ Services, Inc. and Equitable Real Estate Investment
Management, Inc. 30 contracts to service a total of $6.2 billion in
commercial real estate mortgages. The closing of the transaction is subject
to the satisfaction of certain customary conditions.
On September 7, 1995, the Company formed a wholly-owned subsidiary,
AMRESCO Residential Credit Corporation ("ARCC"), to acquire, securitize and
manage residential and consumer loan portfolios. This acquisition represents
an extension of its core asset acquisition and management services, currently
focused in the commercial real estate and business loan sectors, to
residential and consumer loans.
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
$0.09 per share. On June 16, 1995, the Company sold substantially all of the
assets AMRESCO Services, Inc. in an all cash transaction, for a net gain of
approximately $2.4 million, or $0.10 per share.
Page 11
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The following discussion and analysis presents the significant changes
in the financial condition and results of continuing operations of the
Company for the three and nine months ended September 30, 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. The results for the
second quarter of 1995 are discussed along with the third quarter results in
order to provide additional trend analysis due to the transitional nature of
the Company's business (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
---------------------------------- ---------------------
Sept. 30, June 30, Sept. 30, Sept. 30, Sept. 30,
1995 1995 1994 1995 1994
--------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C>
REVENUES:
Management fees $ 5,271 $ 4,740 $ 6,629 $15,136 $ 23,468
Resolution fees 3,039 3,531 15,251 11,615 58,287
Asset portfolio income 10,030 7,855 4,177 23,662 8,433
Mortgage banking fees 5,753 5,549 1,967 14,077 1,967
Other revenues 1,323 1,807 11,759 4,585 16,184
------- ------- ------- ------- --------
Total revenues before
assistance revenue 25,416 23,482 39,783 69,075 108,339
Assistance revenue - (136) 6,999 527 19,466
------- ------- ------- ------- --------
Total revenues 25,416 23,346 46,782 69,602 127,805
EXPENSES:
Personnel 13,566 11,889 17,699 35,961 52,268
Other general and
administrative 1,843 4,454 6,853 9,926 20,910
Interest 1,493 863 387 2,771 1,696
Profit participations 84 71 (135) 446 (65)
------- ------- ------- ------- --------
Total expenses before
reimbursable costs 16,986 17,277 24,804 49,104 74,809
Reimbursable costs - (136) 6,999 527 19,466
------- ------- ------- ------- --------
Total expenses 16,986 17,141 31,803 49,631 94,275
Income from continuing
operations before taxes 8,430 6,205 14,979 19,971 33,530
Income tax expense on continuing
operations 3,234 2,126 6,106 7,541 13,874
------- ------- ------- ------- --------
INCOME FROM CONTINUING
OPERATIONS 5,196 4,079 8,873 12,430 19,656
Gain (loss) from discontinued
operations, net of tax 2,425 (238) 2,425 (976)
------- ------- ------- ------- --------
NET INCOME $ 5,196 $ 6,504 $ 8,635 $14,855 $ 18,680
======= ======= ======= ======= ========
</TABLE>
Page 12
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RESULTS OF OPERATIONS
Revenues from the Company's asset management and resolution services
include fees charged for the management of investments in asset portfolios
and from the successful resolution of the assets within such asset
portfolios. The asset base of each portfolio declines over the life of the
portfolio, thus reducing asset management fees as assets within that
portfolio are resolved. Resolution fees are earned as individual assets
within the asset portfolio are resolved. These fees, therefore, 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, primarily through 1994, in the
management of assets for the Federal Deposit Insurance Corporation (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 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.
Revenues from the Company's commercial mortgage banking activities are
earned from the origination and underwriting 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.
Other revenues consist of interest on the Company's investments in cash
equivalents, consulting revenues earned on due diligence, interest and fees
on loans net of loan participations, and other miscellaneous income.
Additionally, the third quarter of 1994 includes the $10.0 million
NationsBank Contract (defined below) conclusion fee.
Asset management and resolution 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 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 $10.0 million. The proceeds from the fee, net of
expenses associated with the conclusion, resulted in a one-time increase of
$0.15 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 the first quarter of 1995.
Severance costs were accrued at December 31, 1994. Additionally, as a result
of the expiration of the RTC contracts, the conclusion of the FDIC contract,
as well as conclusion of the NationsBank Contract, lower levels of revenue
and income were recognized in the first three quarters of 1995 than was
previously reported during the other quarters of 1994.
THREE MONTHS ENDED SEPTEMBER 30, 1995 COMPARED TO THREE
MONTHS ENDED JUNE 30, 1995
Revenues-- Revenues before assistance revenue for the 1995 third quarter
were $25.4 million compared to $23.5 million for the 1995 second quarter.
Page 13
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This increase is primarily due to a $2.2 million increase in asset portfolio
income related to a $36.6 million increase in investments in asset
portfolios. The $.2 million increase in mortgage banking revenues is the
result of continued growth in originations in that line of business.
Expenses-- Total expenses before reimbursable costs decreased $.3
million in the third quarter of 1995 compared to the previous quarter. The
$1.7 million increase in personnel expense in the third quarter of 1995
compared to the previous quarter is primarily due to $.3 million for the
start-up operations of ARCC, $.3 million for increased incentive compensation
costs due to earnings growth, and $.6 million for increased salary expenses
related to the expansion of the treasury department to ensure maximization of
financial resources, as well as additional internal and contract personnel to
facilitate our reengineering efforts. The $.6 million increase in interest
expense for the third quarter of 1995 in relation to the second quarter of
1995 reflects greater borrowing related to increased investments in asset
portfolios. Other general and administrative expenses decreased $2.6 million
in the third quarter of 1995 primarily due to a $2.4 million change in
estimate of accounts receivable bad debt reserve and other accrued expenses
related to concluded asset management contracts, particularly the FDIC and
RTC contracts. Receivables related to these contracts declined $16.7 million
between December 31, 1994 and September 30, 1995.
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 merger of AMRESCO Holdings, Inc. with and into a
subsidiary of BEI Holdings, Ltd. on December 31, 1993. 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. The decrease in the effective
income tax rate for the 1995 periods was primarily due to permanent tax
differences related to mortgages sold by a partnership in which AMRESCO owns
an interest for which the acquired tax basis exceeded the book basis.
THREE MONTHS ENDED SEPTEMBER 30, 1995 COMPARED TO THREE
MONTHS ENDED SEPTEMBER 30, 1994
Revenues-- Revenues before assistance revenue for the 1995 third
quarter compared to the 1994 third quarter reflected a $14.4 million decrease
primarily related to the $10.0 million, or $.15 per share, NationsBank
Contract early conclusion fee received in August 1994 and included in other
revenues. The $1.4 million decrease in management fees and $12.2 million
decrease in resolution fees resulted from the conclusion of the NationsBank
contract, as well as from reduced revenues from government sector contracts
as these contracts concluded. These decreases were partially offset by
earnings from asset portfolios, which increased $5.9 million due to a $126.6
million increase in investments in asset portfolios, and from mortgage
banking revenue, which increased $3.8 million, due to the inclusion of
Holliday Fenoglio, Inc., which was purchased in August 1994, and AMRESCO
Capital Corporation, which was initiated in April 1994.
Expenses-- Total expenses before reimbursable costs decreased $7.8
million in the third quarter of 1995 compared to the third quarter of 1994.
The 1994 third quarter included expenses for the NationsBank Contract which
concluded during the quarter and for government sector contracts that were
concluding during 1994. Additionally, during the three months ended
September 30, 1995, general and administrative expenses were reduced by a
$2.4 million change in estimate of accounts receivable bad debt reserve and
other accrued expenses related to concluded asset management contracts,
particularly the FDIC and RTC contracts. Receivables related to these
contracts declined $16.7 million between December 31, 1994 and September 30,
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1995. Also, the decrease in expenses compared to the year ago quarter
reflected the corporate downsizing initiatives that began in the fourth
quarter of 1994. These decreases were partially offset by the start-up
operations of ARCC and increased salary expenses related to the expansion of
the treasury department to ensure maximization of financial resources, as
well as additional internal and contract personnel to facilitate our
reengineering efforts.
NINE MONTHS ENDED SEPTEMBER 30, 1995 COMPARED TO NINE MONTHS
ENDED SEPTEMBER 30, 1994
Revenues-- Revenues before assistance revenue for the nine months ended
September 30, 1995 compared to the corresponding period of 1994 decreased
$39.3 million. This decrease was due, in part, to an $8.3 million decrease
in management fees and a $46.7 million decrease in resolution fees. In
addition, other revenues decreased $11.6 million from 1994 to 1995 primarily
as a result of 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.
These decreases were partially offset by asset portfolio income, which
increased $15.2 million due to a significant increase in investments in asset
portfolios, and a $12.1 million increase in mortgage banking revenue,
primarily due to the inclusion of Holliday Fenoglio, Inc., which was
purchased in August 1994, and ACC, which commenced underwriting activities in
the fourth quarter of 1994.
Expenses-- Total expenses before reimbursable costs decreased $25.7
million for the first nine months of 1995 compared to the corresponding
period in 1994. The first nine months of 1994 included expenses of $20.7
million as compared to none in the corresponding period for 1995 for the
NationsBank Contract that concluded in the third quarter of 1994 and for
government sector contracts that were concluding during 1994. Additionally,
during the nine months ended September 30, 1995, general and administrative
expenses were reduced by a $3.7 million change in estimate of accounts
receivable bad debt reserve and other accrued expenses related to concluded
asset management contracts, particularly the FDIC and RTC contracts.
Receivables related to these contracts declined $16.7 million between
December 31, 1994 and September 30, 1995. The decline in expenses related to
concluding contracts was partially offset by increased operating expenses
related to the addition of the mortgage banking line of business and the
growth in the asset acquisition and resolution operations. Also, the decrease
in expenses for the nine months ended September 30, 1995, compared to the
nine months ended September 30, 1994, reflected the corporate downsizing
initiatives that began in the second half of 1994. The $1.1 million increase
in interest expense in 1995 reflects greater borrowing related to increased
investments in asset portfolios.
LIQUIDITY AND CAPITAL RESOURCES
Cash for investment in asset portfolios, originating/underwriting loans,
acquiring loans for securitization, general operating expenses and business
acquisitions is primarily obtained through cash flow from operations and
credit facilities, including: advances on the corporate and portfolio credit
lines, mortgage warehouse lines and nonrecourse debt, retained earnings and
cash flow from the resolution of asset portfolios. Management expects cash
flow from investments in asset portfolios in 1995 to exceed cash flows from
investments in 1994, primarily as a result of increased collections on
wholly-owned asset portfolios in which the Company invests.
On September 29, 1995, the Company entered into the $175.0 million
revolving loan agreement with a syndicate of banks led by NationsBank of
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Texas, N.A. (the "Bank) which matures and is payable in full on September 29,
1997. By its terms, the revolving loan agreement has two components, $75.0
million (including $25.0 million under a temporary bridge facility) available
under a corporate facility and $100.0 million available under a portfolio
facility. The banks' current commitment under the facility is limited to a
total of $127.5 million; $68.9 million (including $25.0 million under a
temporary bridge facility) under the corporate facility and $58.6 million
under the portfolio facility. The additional amounts under the revolving
loan agreement would become available to the Company upon the participation
by additional financial institutions in the syndicate for the loan and upon
an increase in the Company's borrowing base under this agreement. There can
be no assurance that such events will occur. The borrowing terms, including
interest, may be selected by the Company and tied to either the Bank's
variable rate (8-3/4% at September 30, 1995) or, for advances on a term
basis up to approximately 180 days, a rate equal to an adjusted LIBOR rate
(7-5/8% at September 30, 1995 for a term of 30 days). There was a balance of
$33.0 million at 7-5/8% outstanding under the corporate facility with $39.0
million at 7-5/8% and $5.0 million at 8-3/4% for a total of $44.0 million
outstanding under the portfolio facility. The combined balance outstanding
under the loan agreement was $77.0 million at September 30, 1995.
The revolving loan agreement is secured by substantially all of the
assets of the Company not pledged under other credit facilities, including
stock of a majority of the Company's subsidiaries held by the Company. The
revolving loan agreement requires the Company to meet certain financial
tests, including minimum consolidated tangible net worth, maximum
consolidated funded debt to consolidated capitalization ratio, minimum fixed
charge coverage ratio, minimum interest coverage ratio, maximum consolidated
funded debt to consolidated earnings before interest, taxes, depreciation and
amortization ("EBITDA") ratio and maximum corporate facility outstanding to
consolidated EBITDA ratio. The revolving loan agreement contains covenants
that, among other thing, will limit the incurrence of additional
indebtedness, investments, asset sales, loans to shareholders, dividends,
transactions with affiliates, acquisitions, mergers and consolidations, liens
and encumbrances and other matters customarily restricted in such agreements.
Prior to entering into the revolving credit agreement described above,
the Company maintained a $75.0 million line of credit with the Bank which
bore interest at the Bank's floating prime rate or an adjusted LIBOR rate
plus 150 basis points. This line of credit was terminated with the execution
of the revolving loan agreement.
During July 1995, two wholly-owned subsidiaries of the Company jointly
entered into a nonrecourse debt agreement for $27.5 million to support
wholly-owned asset purchases. This nonrecourse facility is secured by all
wholly-owned investments in asset portfolios purchased with borrowings under
this debt and bears interest at the financing company's prime rate plus
1-1/2% or LIBOR plus 3%. There was a balance outstanding at September 30,
1995, of $21.9 million under this nonrecourse debt agreement, $3.4 million at
10-1/4% and $18.5 million at 8-15/16%. This facility matures on July 31,
1998.
On April 28, 1995, a wholly-owned subsidiary of the Company entered into
a $25.0 million warehouse line of credit agreement with the Bank to support
its commercial mortgage financing. This facility is secured by loans
originated through borrowings under this facility and bears interest bears
interest at either the prime rate announced from time-to-time by NationsBank
of Texas or an adjusted LIBOR rate (as defined in the facility) plus 2%. The
loan is secured by the mortgage loans originated by the Company and held for
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sale under the facility. The Company is also a guarantor on this facility.
At September 30, 1995, an advance of $2.7 million was outstanding at an
interest rate of 7-13/16%. This facility matures on January 25, 1997.
On August 15, 1995, a wholly-owned subsidiary of the Company entered
into warehouse line of credit agreement with a funding corporation to
facilitate multi-family mortgage loan underwriting and origination. This
facility is secured by the loans originated through borrowings under this
facility and the stated interest rate for this line is an adjusted 30-day
LIBOR rate plus 3% (8-33/50% at September 30, 1995), and interest and
principal are payable upon the receipt of the proceeds of the sale or other
disposition of related mortgage loans. The Company is a guarantor on this
facility. At September 30, 1995, an advance of $3.0 million was outstanding
at an interest rate of 8-33/50%. Each borrowing under this facility is due
60 days after funding.
On September 27, 1995, a wholly-owned subsidiary of the Company entered
into a $8.7 million Global Master Repurchase Agreement to support the
purchase of certain commercial mortgage pass-through certificates. The
Agreement bears interest at a rate based on LIBOR (7-3/8% at September 30,
1995) payable monthly. This facility is secured by the commercial mortgage
pass-through certificates and repayment of principal is based on cash flow
fro such securities.
Accounts receivable decreased from $20.7 million at December 31, 1994,
to $7.7 million at September 30, 1995, due to the conclusion and expiration
of certain asset management contracts.
In 1995, the Company intends to pursue (i) additional investment in
asset portfolio acquisition opportunities in 1995 aggressively, by acquiring
asset portfolios both for its own account and as an investor with various
capital partners who acquire such asset portfolios, (ii) acquisitions of new
businesses and (iii) expansion of current businesses. The funds for such
acquisitions and investments are anticipated to be provided in 1995 by cash
flows and borrowings under the Company's revolving loan agreement and
additional debt and capital alternatives. As a result, interest expense in
1995 will be higher than the interest expense in 1994.
On October 25, 1995, the Company announced that it will discontinue its
policy of paying cash dividends. The Board of Directors has determined to
retain all earnings to support current operations of the Company and finance
future expansion. The credit agreements restrict the payment of cash
dividends unless certain earnings tests are satisfied. Future declarations
of dividends, if any, will be determined in light of then-current conditions,
including the Company's earnings, operations, capital requirements,
liquidity, financial condition, restrictions in financing agreements and
other factors deemed relevant by the Board of Directors.
The Company believes that its funds on hand of $12.7 million at
September 30, 1995, cash flow from operations, its unused borrowing capacity
under its credit lines and its continuing ability to obtain financing through
various debt and capital offerings 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
Company currently is contemplating the issuance of additional equity and/or
debt securities to support its expected working capital requirements. The
issuance of such securities will be primarily dependent on market conditions.
There can be no assurance that any such issuances will occur. The magnitude
of the Company's acquisition and investment program will be governed to some
extent by the availability of capital.
The Company filed a registration statement with respect to $2,000,000 of
new common stock. The Company anticipates reducing its revolving debt by the
net proceeds of the offering. There are no assurances that this filing will
be consumated.
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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 19.
(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: October 25, 1995 By: /s/ Barry L. Edwards
-----------------------------
Barry L. Edwards
Executive Vice President
and Chief Financial Officer
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EXHIBIT INDEX
3(i). Restated Certificate of Incorporation, as amended
10(a). Warehousing Credit and Security Agreement, dated as of August 15,
1995, between AMRESCO Capital Corporation and Residential Funding
Corporation
10(b). Revolving Loan Agreement, dated as of September 29, 1995, among
AMRESCO, INC. and Other Entities Designated Within as Borrowers and
NationsBank of Texas, N.A. as Agent and NationsBank of Texas, N.A.
and Other Entities Designated Within
11. Computation of Per Share Earnings
27. Financial Data Schedule
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<PAGE>
RESTATED
CERTIFICATE OF INCORPORATION
OF
LIFETIME COMMUNITIES, INC.
The following is a Restated Certificate of Incorporation of Lifetime
Communities, Inc., a corporation for profit incorporated under the laws of
Delaware. The original Certificate of Incorporation of Lifetime Communities,
Inc. was filed with the Secretary of State of the State of Delaware on July
27, 1977. This Restated Certificate of Incorporation was duly proposed by
the directors and adopted by the stockholders of said corporation in
accordance with the provisions of Sections 242 and 245 of the General
Corporation Law of the State of Delaware pursuant to a Plan and Agreement of
Merger adopted by the shareholders of Lifetime Communities, Inc., and BEI
Holdings, Ltd., a corporation formed under the laws of Georgia, and
integrates all previous amendments and reflects the amendments required by
such agreement. This Restated Certificate of Incorporation shall be effective
at 5:00 p.m. E.D.T. on May 30, 1986.
The Restated Certificate is as follows:
FIRST: The name of this corporation is:
BEI HOLDINGS, LTD.
SECOND: The address of its registered office in the State of Delaware
is 1209 Orange Street, in the City of Wilmington, County of New Castle. The
name of its registered agent at such address is The Corporation Trust Company.
THIRD: The purpose of the corporation is to engage in any lawful act
or activity for which a corporation may be organized under the General
Corporation Law of Delaware.
FOURTH: (a) The total number of shares of stock which the corporation
shall have authority to issue is twenty million (20,000,000) shares which
shall be divided into classes as follows: fifteen million (15,000,000) shares
shall be common stock, each share of which shall have a par value of $.05
(five cents); and five million (5,000,000) shares shall be preferred stock,
each share of which shall have a par value of $1.00 (one dollar) having such
voting powers, full or limited, or no voting powers, designations,
preferences and relative, participating, optional or other special rights,
and qualifications, limitations or restrictions thereof as may be fixed by
resolution of the Board of Directors.
(b) The holders of common stock shall be entitled to one vote for each
share of stock held. Subject to limitations prescribed by law, this
Certificate of
<PAGE>
Incorporation, and any resolution adopted by the Board of Directors pursuant
to this Article relating to preferred stock:
(1) the holders of common stock shall have the right to vote for
the election of directors of the corporation or on any other matter;
(2) dividends may be paid upon the common stock as and when
declared by the Board of Directors out of any funds legally available
therefor;
(3) upon any dissolution or distribution of the assets of the
corporation, whether voluntary or involuntary, the remaining net assets
of the corporation shall be distributed pro rata to the holders of the
common stock.
(c) The Board of Directors is authorized, subject to limitations
prescribed by law, to provide for the issuance of the preferred shares in
series, and by filing a certificate pursuant to the General Corporation Law
of Delaware, to establish the number of shares to be included in each such
series, and to fix voting powers, designations, preferences and relative,
participating, optional or other special rights and qualifications,
limitations or restrictions of the shares of each such series. The authority
of the Board with respect to each series shall include, but not be limited
to, determination of the following:
(1) the number of shares constituting that series and the
distinctive designation of that series;
(2) the dividend rate on the shares of that series, whether
dividends shall be cumulative, and, if so, from which date or dates;
(3) whether that series shall have voting rights, in addition to the
voting rights provided by law, and, if so, the terms of such voting rights;
(4) whether that series shall have conversion privileges, and, if so,
the terms and conditions of such conversion, including provision for
adjustment of the conversion rate in such events as the Board of Directors
shall determine;
(5) whether or not the shares of that series shall be redeemable,
and, if so, the terms and conditions of such redemption, including the date
or dates upon or after which they shall be redeemable, and the amount per
share payable in case of redemption, which amount may vary under different
conditions and at different redemption dates;
(6) the rights of the shares of that series in the event of
voluntary or involuntary liquidation, dissolution or winding up of the
corporation; and
(7) any other relative rights, preferences and limitations of that
series.
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FIFTH: The name and mailing address of the incorporator is:
Arthur W. Milam
P.O. Box 58
Jacksonville, Florida 32201
SIXTH: The corporation is to have perpetual existence.
SEVENTH: The property, affairs and business of the corporation shall be
managed by its Board of Directors consisting of not less than six (6) nor
more than nine (9) persons. The exact number of directors within the maximum
and minimum limitations specified herein shall be fixed from time to time by
resolution of the Board of Directors. The directors shall be classified with
respect to the time during which they shall severally hold office by dividing
them into three classes, as nearly equal in number as possible. All
directors shall hold office until their successors shall be elected and shall
qualify. At the first meeting of the stockholders of the corporation held
for the election of such classified Board of Directors, the directors of the
first class shall be elected for a term of one year, the directors of the
second class for a term of two years, and the directors of the third class
for a term of three years. At each annual meeting of stockholders held
thereafter, the successors to the class of directors whose terms shall expire
that year shall be elected to hold office for a term of three years, so that
the term of office of one class of directors shall expire in each year. The
directors shall have the power, from time to time and at any time, when the
stockholders are not assembled at a meeting, to increase or decrease their
own number, within the maximum and minimum limitations specified herein, by
resolution of the Board of Directors. If the number of directors be
increased, all of the additional directors may be elected and classified by a
majority of the directors in office at the time of the increase, or, if not
so elected prior to the next annual meeting of stockholders, they shall be
elected and classified by plurality vote by the stockholders at such annual
meeting. Directors need not be stockholders.
EIGHTH: In furtherance and not in limitation of the powers conferred
by statute, the board of directors is expressly authorized:
To make, alter or repeal the bylaws of the corporation.
To authorize and cause to be executed mortgages and liens upon the
real and personal property of the corporation.
To set apart out of any of the funds of the corporation available for
dividends a reserve or reserves for any proper purpose and to abolish any
such reserve in the manner in which it was created.
To determine whether any, and, if any, what part, of the net profits
of the corporation or of its net assets in excess of its capital shall be
declared in dividends and paid to the stockholders, and to direct and
determine the use and disposition of any such net profits or such net
assets in excess of capital.
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<PAGE>
To fix from time to time the amount of profits of the corporation to
be reserved as working capital or for any other lawful purpose.
To establish bonus, profit-sharing or other types of incentive or
compensation plans for the employees (including officers and directors) of
the corporation and to fix the amount of profits to be distributed or
shared and to determine the persons to participate in any such plans and
the amounts of their respective participations.
Subject to the applicable provisions of the bylaws then in effect, to
determine from time to time, whether and to what extent and at what times
and places and under what conditions and regulations the accounts and books
of the corporation or any of them, shall be open to the inspection of the
stockholders, and no stockholder shall have any right to inspect any
account or book or document of the company except as conferred by the laws
of the State of Delaware, unless and until authorized to do so by
resolution of the Board of Directors or of the stockholders of the
corporation.
By a majority of the whole board, to designate one or more committees,
each committee to consist of two or more of the directors of the
corporation. The board may designate one or more directors as alternate
members of any committee, who may replace any absent or disqualified member
at any meeting of the committee. Any such committee, to the extent
provided in the resolution or in the bylaws of the corporation, shall have
and may exercise the powers of the board of directors in the management of
the business and affairs of the corporation, and may authorize the seal of
the corporation to be affixed to all papers which may require it; but no
such committee shall have the power or authority in reference to amending
the certificate of incorporation, adopting an agreement of merger or
consolidation, recommending to the stockholders the sale, lease or exchange
of all or substantially all of the corporation's property and assets,
recommending to the stockholders a dissolution of the corporation or a
revocation of a dissolution, or amending the bylaws of the corporation;
and, unless the resolution or bylaws expressly so provide, no such
committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock, provided, however, the bylaws may provide
that in the absence or disqualification of any member of such committee or
committees, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum,
may unanimously appoint another member of the board of directors to act at
the meeting in the place of any such absent or disqualified member.
No contract or other transaction between the corporation and any
other corporation and no other act of the corporation shall, in the absence
of fraud, in any way be affected or invalidated by the fact that any of the
directors of the corporation are pecuniarily or otherwise interested in, or
are directors or officers of such other corporation. Any director of the
corporation individually or any firm or association of which any director
may be a member, may be a
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<PAGE>
party to, or may be pecuniarily or otherwise interested in any contract or
transaction of the corporation, provided that the fact that he individually
or such firm or association is so interested shall be disclosed or shall
have been known to the Board of Directors and the contract or transaction
is approved in good faith by the affirmative votes of a majority of the
disinterested directors, even though the disinterested directors may be
less than a quorum. Any director of the corporation who is also a director
or officer of such other corporation or who is so interested may be counted
in determining the existence of a quorum at any meeting of the Board of
Directors which shall authorize any such contract or transaction. Any
director of the corporation may vote upon any contract or other transaction
between the corporation and any subsidiary or affiliated corporation
without regard to the fact that he is also a director of such subsidiary
or affiliated corporation.
The corporation shall indemnify, to the full extent that it shall have
power under applicable law to do so and in the manner permitted by such
law, any person made or threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that he is or was a
director or officer of the corporation. The corporation may indemnify, to
the full extent it shall have power under applicable law to do so and in a
manner permitted by such law, any person made or threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the
fact that he is or was an employee or agent of the corporation, or is or
was serving at the request of the corporation as a director, officer,
employee or agent of, or participant in, another corporation, partnership,
joint venture, trust or other enterprise. The indemnification provided by
this paragraph shall not be deemed exclusive of any other rights to which
any person seeking indemnification may be entitled under any bylaw,
agreement, vote of stockholders or disinterested directors or otherwise,
both as to action in his official capacity and as to action in another
capacity while holding such office, and shall continue as to a person who
has ceased to be such director, officer, employee, agent or participant and
shall inure to the benefit of the heirs, executors and administrators of
such a person.
In addition to the powers and authorities hereinbefore or by statute
expressly conferred upon it, the Board of Directors may exercise all such
powers and do all such acts and things as may be exercised or done by the
corporation, subject, nevertheless, to the provisions of the laws of the
State of Delaware, of this Certificate of Incorporation and of the Bylaws
of the corporation.
NINTH: Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a
summary way of this corporation or of any creditor or stockholder thereof or
on the application of any receiver or receivers
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<PAGE>
appointed for this corporation under the provisions of Section 291 of Title 8
of the Delaware Code or on the application of trustees in dissolution or of
any receiver or receivers appointed for this corporation under the provisions
of Section 279 of Title 8 of the Delaware Code order a meeting of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of this corporation, as the case may be, to be summoned in such
manner as the said court directs. If a majority in number representing
three-fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this corporation, as the case may
be, agree to any compromise or arrangement and to any reorganization of this
corporation as consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of this corporation, as the case may be, and also on this
corporation.
TENTH: Meetings of stockholders and directors may be held within or
without the State of Delaware, as the Bylaws may provide. The books of the
corporation may be kept (subject to any provisions contained in the statutes)
outside the State of Delaware at such place or places as may be designated
from time to time by the Board of Directors or in the Bylaws of the
corporation. Elections of directors need not be by written ballot unless the
Bylaws of the corporation shall so provide.
ELEVENTH: The corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute or by this Certificate of
Incorporation, and all rights conferred upon stockholders herein are granted
subject to this reservation.
Article Seven may not be amended, altered, changed or repealed without
the approval of the holders of 66 & 2/3% of the voting securities of the
corporation.
TWELFTH: No holder of any of the shares of the stock of this
corporation of any class shall be entitled as of right to purchase or
subscribe for any unissued stock of any class or any additional stock of any
class to be issued by reason of any increase of the authorized capital stock
of the corporation of any class, or to purchase or subscribe for bonds,
certificates of indebtedness, debentures or other securities or obligations
convertible into, or carrying any right to purchase, any stock of any class,
but any such unissued stock or such additional authorized issue of any stock
or other securities or obligations convertible into, or carrying any right to
purchase, any stock of any class, may be issued and disposed of pursuant to
resolutions of the Board of Directors to such persons, firms, companies or
associations and upon such terms as may be deemed advisable by the Board of
Directors in the exercise of its discretion.
THIRTEENTH: If any person, firm or corporation (collectively referred
to as the "Owner") or any persons, firm or corporation controlling the Owner,
controlled by the Owner or under common control with the Owner, or any group
of which the Owner or any of the foregoing persons, firms or corporations are
members, or any other group controlling the Owner, controlled by the Owner,
or under common control
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<PAGE>
with the Owner, owns of record, or owns beneficially, directly or indirectly,
more than 5% of any class of equity security of the corporation, then,
subject to applicable statutory requirements, any merger or consolidation of
the corporation with the Owner, or any sale, lease or exchange of
substantially all of the assets of the corporation or the Owner to the other
may not be effected without the consent of the holders of a majority of the
corporation's securities voted at the meeting called for that purpose, other
than those voting securities owned by the Owner, as defined in this Article
Thirteen, given in person or by proxy at such meeting.
The provisions of this Article Thirteen shall not apply to the merger of
Fidelity Mortgage Investors, a Massachusetts business trust into the
corporation, with the corporation being the surviving entity.
FOURTEENTH: No action required or permitted to be taken by the
stockholders of the corporation at any annual or special meeting of such
stockholders may be taken except at the annual or a special meeting of
stockholders duly called as provided in the Bylaws of the corporation.
Special meetings of stockholders may be called at any time by the Board of
Directors or the Chairman of the Board; and shall be called by the Board of
Directors or the Chairman of the Board at the request of the holders of not
less than one-tenth of all the shares entitled to vote at the meeting.
IN WITNESS WHEREOF said Lifetime Communities, Inc. has caused its
corporate seal to be hereunto affixed and this Restated Certificate of
Incorporation to be signed by Charles C. Ray, Jr., its President and Donna D.
Boswell, its Secretary, this 29th day of May, 1986.
ATTEST:
By: /s/ Donna D. Boswell By: /s/ Charles C. Ray, Jr.
----------------------------- --------------------------------
Secretary President
STATE OF FLORIDA
COUNTY OF DUVAL
Be it remembered that on this 29th of May, A.D., 1986, personally came
before me Maria L. Bentley, a notary public in and for the county and state
aforesaid, Charles C. Ray, Jr., President of the corporation described in and
which executed the foregoing Restated Certificate of Incorporation, known to
me personally to be such and he, the said Charles C. Ray, Jr. as such
president, duly executed the said certificate before me and acknowledged the
same certificate to be his act and deed and the act and deed of said
corporation and the facts stated therein are true; and
- 7 -
<PAGE>
that the seal affixed to said certificate and attested by the Secretary of
said corporation is the common or corporate seal of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and seal of office the
day and year aforesaid.
[NOTARY SEAL] /s/ Maria L. Bentley
-----------------------------------
Notary Public
- 8 -
<PAGE>
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
BEI HOLDINGS, LTD.
(Formerly Lifetime Communities, Inc.)
BEI Holdings, Ltd., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of BEI HOLDINGS,
LTD., resolutions were duly adopted setting forth a proposed amendment of the
Certificate of Incorporation of said corporation, declaring said amendment to
be advisable and calling a meeting of the stockholders of said corporation
for consideration thereof. The resolution setting forth the proposed
amendment is as follows:
RESOLVED, that the Certificate of Incorporation of BEI Holdings, Ltd. be
amended by adding as a new Article Fifteenth the language set forth on page
A-1 of the Proxy Statement of BEI Holdings, Ltd. dated January 30, 1987,
being as follows:
FIFTEENTH: No director of the corporation shall have, or incur, any
personal liability to the corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director; provided,
that this provision shall not eliminate or limit the liability of a
director (i) for any breach of such director's duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the director
derived an improper personal benefit. If the Delaware General
Corporation Law shall be hereafter repealed or modified, the
elimination of liability of a director herein provided shall be to the
fullest extent permitted by the Delaware
<PAGE>
General Corporation Law as amended. Any repeal or modification of
this provision shall not adversely affect any right or protection of a
director of the corporation existing immediately prior to such repeal
or modification.
SECOND: That thereafter, pursuant to resolution of its Board of
Directors, at the annual meeting of shareholders of said corporation, duly
called and held upon notice in accordance with Section 222 of the General
Corporation law of the state of Delaware, the necessary number of shares as
required by statute were voted in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
FOURTH: That the capital of said corporation shall not be reduced
under or by reason of said amendment.
IN WITNESS WHEREOF, said BEI HOLDINGS, LTD. has caused this certificate
to be signed by Gerald E. Eickhoff, its President, and Dennis R. Byerly, its
Secretary, this 1st day of April, 1987.
BEI HOLDINGS, LTD.
By: /s/ Gerald E. Eickhoff
-----------------------------------
ATTEST: Gerald E. Eickhoff, its President
By: /s/ Dennis R. Byerly
---------------------------------
Dennis R. Byerly, its Secretary
- 2 -
<PAGE>
CERTIFICATE OF AMENDMENT
OF RESTATED
CERTIFICATE OF INCORPORATION
OF BEI HOLDINGS, LTD.
BEI Holdings, Ltd., a corporation organized and existing under and by
virtue of the General Corporation Law of the state of Delaware,
DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of BEI Holdings,
Ltd., resolutions were duly adopted setting forth a proposed amendment of the
Certificate of Incorporation of said corporation, declaring said amendment to
be advisable and calling a meeting of the stockholders of said corporation
for consideration thereof. The resolution setting forth the proposed
amendment is as follows:
RESOLVED, That the Certificate of Incorporation of BEI Holdings, Ltd. be
amended by deleting the first sentence of Article Seventh and substituting in
lieu thereof the language set forth on page 21 of the Proxy Statement of BEI
Holdings, Ltd. dated February 3, 1989, being as follows:
SEVENTH: The property, affairs and business of the corporation shall be
managed by its Board of Directors consisting of not less than seven (7)
nor more than fifteen (15) persons. The exact number of directors within
the maximum and minimum limitations specified herein shall be fixed from
time to time by resolution of the Board of Directors. The directors shall
be classified with respect to the time during which they shall severally
hold office by dividing them into three classes, as nearly equal in number
as possible. All directors shall hold office until their successors shall
be elected and shall qualify. At the first meeting of the stockholders of
the corporation held for the election of such classified Board of
Directors, the directors of the first class shall be elected for a term of
one year, the directors of the second class for a term of two years, and
the directors of the third class for a term of three years. At each annual
meeting of stockholders held thereafter, the successors to the class of
directors whose terms shall expire that year shall be elected to hold
office for a term of three years, so that the term of office of one class
of directors shall expire in each year. The directors shall have the power,
from time to time and at any time, when the stockholders are not
assembled at a meeting, to increase or decrease their own number, within
the maximum and minimum limitations specified herein, by resolution of the
Board of Directors. If the number of directors be increased, all of the
additional directors may be elected and classified by a majority of the
directors in office at the time of the increase, or, if not so elected
prior to the next annual meeting of stockholders, they shall be elected
and classified by plurality vote by the stockholders at such annual
meeting. Directors need not be stockholders.
<PAGE>
SECOND: That thereafter, pursuant to resolution of its Board of
Directors, at the annual meeting of shareholders of said corporation, duly
called and held upon notice in accordance with Section 222 of the General
Corporation Law of the state of Delaware, the necessary number of shares as
required by statute were voted in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the state of
Delaware.
FOURTH: That the capital of said corporation shall not be reduced
under or by reason of said amendment.
IN WITNESS WHEREOF, said BEI Holdings, Ltd. has caused this certificate
to be signed by Gerald E. Eickhoff, its President, and James B. Baker, its
Secretary, this 29th day of March, 1989.
ATTEST: BEI HOLDINGS, LTD.
By: /s/ James B. Baker By: /s/ Gerald E. Eickhoff
--------------------------- ---------------------------------
James B. Baker, Secretary Gerald E. Eickhoff, its President
[CORPORATE SEAL]
2
<PAGE>
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
BEI HOLDINGS, LTD.
Pursuant to Section 242 of the General Corporation Law
of the State of Delaware
_________________
BEI HOLDINGS, LTD. (the "Corporation"), a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware, DOES HEREBY CERTIFY:
FIRST: At a meeting of the Board of Directors of the Corporation duly
called and held on November 16, 1993, resolutions were duly adopted declaring
an amendment to the Restated Certificate of Incorporation of the Corporation
to be advisable, which amendment would increase the number of authorized
shares of common stock of the Corporation, and recommending that such
amendment be submitted to the stockholders of the Corporation for
consideration thereof at a Special Meeting of Stockholders. Pursuant to said
resolution, the proposed amendment to the first paragraph of Article FOURTH
of the Restated Certificate of Incorporation of the Corporation is set forth
below:
FOURTH: (a) The total number of shares of stock which the
corporation shall have authority to issue is fifty-five million
(55,000,000) shares. Of such total number of authorized shares of
stock, fifty million (50,000,000) shares shall be common stock, each
share of which common stock shall have a par value of $.05 (five
cents), and five million (5,000,000) shares shall be preferred stock,
each share of which preferred stock shall have a par value of $1.00
(one dollar) and shall have such voting powers, full or limited, or no
voting powers, designations, preferences and relative, participating,
optional or other
<PAGE>
special rights, and qualifications, limitations or restrictions thereof
as may be fixed by resolution of the Board of Directors."
SECOND: At a Special Meeting of Stockholders of the Corporation duly
called and held on December 30, 1993, the affirmative vote of majority of the
votes permitted to be cast by the holders of the outstanding shares of the
Corporation's stock was obtained in favor of said amendment with respect to
paragraph (a) of Article FOURTH.
THIRD: Said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be signed by Gerald E. Eickhoff, its President and Chief
Executive Officer, and attested by Louie Moon, its Secretary, this 30th day
of December, 1993.
/s/ Gerald E. Eickhoff
-------------------------------------
Gerald E. Eickhoff
President and Chief Executive Officer
Attest:
/s/ Louie Moon
- -----------------------------
Louie Moon
Secretary
- 2 -
<PAGE>
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
BEI HOLDINGS, LTD.
Pursuant to Section 242 of the General Corporation Law
of the State of Delaware
_________________
BEI HOLDINGS, LTD. (the "Corporation"), a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware, DOES HEREBY CERTIFY:
FIRST, At a meeting of the Board of Directors of the Corporation duly
called and held on March 15, 1994, a resolution was duly adopted declaring an
amendment to the Restated Certificate of Incorporation of the Corporation to
be advisable, which amendment would change the name of the Corporation from
"BEI Holdings, Ltd." to "AMRESCO, INC.," and recommending that such amendment
be submitted to the stockholders of the Corporation for consideration thereof
at the Annual Meeting of Stockholders. Pursuant to said resolution, the
proposed amendment to Article FIRST of the Restated Certificate of
Incorporation of the Corporation is set forth below:
FIRST: The name of the corporation is: AMRESCO, INC.
SECOND. At the Annual Meeting of Stockholders of the Corporation duly
called and held on May 23, 1994, the affirmative vote of majority of the
votes permitted to be cast by the holders of the outstanding shares of the
Corporation's
<PAGE>
stock was obtained in favor of the proposal to change the Corporation's name
from "BEI Holdings, Ltd." to "AMRESCO, INC."
THIRD. Said amendment was duly adopted in accordance with the provisions
of Section 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be signed and attested by its duly authorized officers, this
23rd day of May, 1994.
By: /s/ Robert L. Adair III
-------------------------------------
Name: Robert L. Adair III
Title: President
Attest:
By: /s/ L. Keith Blackwell
-------------------------------
Name: L. Keith Blackwell
Title: Secretary
- 2 -
<PAGE>
AMRESCO, INC.
EXHIBIT 11 - COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, 1995 September 30, 1995
------------------ ------------------
<S> <C> <C>
Net income $5,196,000 $14,855,000
========== ===========
PRIMARY
Weighted average shares outstanding 24,132,895 23,928,519
Net effect of dilutive stock
options based on the Treasury stock
method using average market price 544,894 501,303
---------- -----------
Total 24,677,789 24,429,822
========== ===========
Earnings per share $0.21 $0.61
========== ===========
FULLY DILUTED (a)
Weighted average shares outstanding 24,132,895 23,928,519
Net effect of dilutive stock options
based on the Treasury stock method
using the higher of average or
ending market price 674,685 603,227
---------- -----------
Total 24,807,580 24,531,747
========== ===========
Earnings per share $0.21 $0.61
========== ===========
</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.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the AMRESCO,
INC. September 30, 1995, 10-Q and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 12,720
<SECURITIES> 27,222
<RECEIVABLES> 10,298
<ALLOWANCES> 2,641
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 6,900
<DEPRECIATION> 1,781
<TOTAL-ASSETS> 291,082
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 1,210
0
0
<OTHER-SE> 127,814
<TOTAL-LIABILITY-AND-EQUITY> 291,082
<SALES> 0
<TOTAL-REVENUES> 69,602
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 46,860
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,771
<INCOME-PRETAX> 19,971
<INCOME-TAX> 7,541
<INCOME-CONTINUING> 12,430
<DISCONTINUED> 2,425
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,855
<EPS-PRIMARY> 0.61
<EPS-DILUTED> 0
</TABLE>
