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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
[X] ANNUAL REPORT PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE YEAR ENDED DECEMBER 31, 1997
Commission File Number 1-9240
TRANSCONTINENTAL REALTY INVESTORS, INC.
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(Exact Name of Registrant as Specified in Its Charter)
Nevada 94-6565852
- ------------------------------- -------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
10670 North Central Expressway, Suite 300, Dallas, Texas 75231
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(Address of Principal Executive Offices) (Zip Code)
(214) 692-4700
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(Registrant's Telephone Number, Including Area Code)
Securities Registered Pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
Name of each exchange on
Title of each class which registered
- ------------------------------ ----------------------------
<S> <C>
Common Stock, $.01 par value New York Stock Exchange
</TABLE>
Securities Registered Pursuant to Section 12(g) of the Act:
NONE
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 at least the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [X]
As of March 6, 1998, the Registrant had 3,889,200 shares of Common Stock
outstanding. Of the total shares outstanding 2,128,945 were held by other than
those who may be deemed to be affiliates, for an aggregate value of $33,531,000
based on the last trade as reported on the New York Stock Exchange on March 6,
1998. The basis of this calculation does not constitute a determination by the
Registrant that all of such persons or entities are affiliates of the
Registrant as defined in Rule 405 of the Securities Act of 1933, as amended.
Documents Incorporated by Reference:
Consolidated Financial Statements of Income Opportunity Realty Investors, Inc.
Commission File No. 1-9525
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This Form 10-K/A amends the Registrant's annual report on Form 10-K for the year
ended December 31, 1997 as follows:
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS - LIQUIDITY AND CAPITAL RESOURCES - page 28.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - CONSOLIDATED STATEMENTS OF
CASH FLOWS - page 41 and 42.
<PAGE> 3
ITEM 6. SELECTED FINANCIAL DATA (Continued)
The Company purchased fifteen properties in 1997 for a total of $69.9 million
and six properties in 1996 for a total of $7.2 million. The Company sold five
properties in 1997 for a total of $30.6 million and five properties in 1996 for
a total of $9.6 million.
Shares and per share data have been restated for the three for two forward
Common Stock split effected February 15, 1996.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Introduction
Transcontinental Realty Investors, Inc. (the "Company") invests in real estate
through acquisitions, leases and partnerships and in mortgage loans on real
estate, including first, wraparound and junior mortgage loans. The Company is
the successor to a California business trust organized on September 6, 1983
which commenced operations on January 31, 1984.
Liquidity and Capital Resources
Cash and cash equivalents at December 31, 1997 aggregated $24.7 million
compared with $1.0 million at December 31, 1996. The principal reasons for
this increase in cash are discussed in the paragraphs below.
The Company's principal sources of cash have been and will continue to be from
property operations, proceeds from property sales, the collection of mortgage
notes receivable, borrowings and to a lesser extent, distributions from
partnerships. The Company expects that its cash balance at December 31, 1997,
and cash that will be generated in 1998 from the collection of mortgage notes
receivable, sales of properties, borrowings against certain of the Company's
unencumbered properties and refinancing or extension of certain of its mortgage
debt will be sufficient to meet all of the Company's cash requirements,
including debt service obligations coming due in 1998, dividend payments and
property maintenance and improvements, as more fully discussed in the
paragraphs below.
Net cash provided by operating activities increased to $1.2 million in 1997 from
a cash deficit of $3.4 million in 1996. The primary factors affecting the
Company's cash flow from operations are discussed in the following paragraphs.
The Company's cash flow from property operations (rents collected less payments
for property operating expenses) increased from $12.7 million in 1996 to $16.2
million in 1997. This increase is primarily the result of the Company having
acquired 5 income producing properties in 1996 and 15 income producing
properties in 1997. Also contributing to the increase was increased occupancy
and rents, at the Company's apartments and commercial properties, and the
Company's control of operating expenses. These increases are partially offset
by decreases due to the sale of three income producing properties in 1996 and
1997, respectively. The Company's management believes that this trend will
continue as a result of increased rental rates at both the Company's apartments
and commercial properties and increased occupancy at its commercial properties.
Interest collected decreased from $1.2 million in 1996 to $1.1 million in 1997.
This decrease is due to four mortgage notes receivable being paid in full in
1997.
Interest paid increased from $14.2 million in 1996 to $16.0 million in 1997.
This increase is due to properties acquired subject to debt and financings and
refinancings obtained on previously unencumbered properties during 1996 and
1997. These increases were partially offset by a decrease of $73,000 due to
properties sold in 1997.
General and administrative expenses paid decreased from $2.8 million in 1997 to
$2.5 million in 1996. This decrease is due to a decrease in legal fees related
to the Olive and other litigation partially offset by an increase in advisory
cost reimbursements and other professional fees.
In January 1997, the Company received an insurance settlement of $9.5 million
relating to 1995 hail storm and flood damage to the Republic Towers Office
Building in Dallas, Texas. In 1996 the Company received a $1.5 million
litigation settlement from the former owners of an office building in New
Jersey.
28
<PAGE> 4
TRANSCONTINENTAL REALTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Years Ended December 31,
--------------------------------------------
1997 1996 1995
------------ ------------ ------------
(dollars in thousands)
<S> <C> <C> <C>
Cash Flows from Operating Activities
Rents collected ............................... $ 57,144 $ 43,401 $ 46,511
Interest collected ............................ 1,098 1,232 1,256
Interest paid ................................. (16,016) (14,167) (14,676)
Payments for property operations
(including $2,262 in 1997, $1,879 in
1996 and $2,928 in 1995 to affiliates) ...... (40,984) (30,738) (31,171)
Advisory and net income fee paid to
affiliate ................................... (1,807) (1,784) (1,770)
General and administrative expenses paid
(including $1,187 in 1997, $1,047 in
1996 and $877 in 1995 to affiliates) ........ (2,457) (2,785) (1,216)
Distributions from operating cash flow of
equity investees ............................ 687 649 666
Insurance/Litigation settlement ............... 9,633 1,500 500
Other ......................................... 1,119 (754) 1,122
------------ ------------ ------------
Net cash provided by (used in) operating
activities ............................... 8,417 (3,446) 1,222
Cash Flows from Investing Activities
Collections on notes receivable ............... 5,048 952 2,851
Real estate improvements ...................... (5,767) (3,406) (8,024)
Proceeds from sale of real estate ............. 29,081 8,922 24,445
Acquisitions of real estate (including
$2,966 in 1997, $339 in 1996 and $56 in
1995 to affiliates) ......................... (46,433) (7,689) (1,339)
Acquisition of partnership interests .......... -- -- (50)
Contributions to equity investees ............. (731) (161) (443)
------------ ------------ ------------
Net cash provided by (used in) investing
activities .................................... (18,802) (1,382) 17,440
</TABLE>
The accompanying notes are an integral part of these Consolidated Financial
Statements.
41
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TRANSCONTINENTAL REALTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
<TABLE>
<CAPTION>
For the Years Ended December 31,
1997 1996 1995
------------ ------------ ------------
(dollars in thousands)
<S> <C> <C> <C>
Cash Flows from Financing Activities
Distributions from financing cash flow of
equity investees ............................... $ 1,101 $ -- $ 853
Payments on notes payable ....................... (37,095) (14,545) (35,205)
Proceeds from notes payable ..................... 73,817 13,550 26,072
Dividends paid .................................. (1,090) (1,115) (267)
Shares of Common Stock repurchased .............. (445) (904) --
Deferred financing costs ........................ (2,130) (818) (1,058)
------------ ------------ ------------
Net cash provided by (used in)
financing activities ....................... 34,158 (3,832) (9,605)
------------ ------------ ------------
Net increase (decrease) in cash and cash
equivalents .................................... 23,773 (8,660) 9,057
Cash and cash equivalents, beginning of year ..... 960 9,620 563
------------ ------------ ------------
Cash and cash equivalents, end of year ........... $ 24,773 $ 960 $ 9,620
============ ============ ============
Reconciliation of net income (loss) to net
cash provided by (used in) operating
activities
Net income (loss) ............................. $ 12,599 $ (7,806) $ (3,726)
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities
Depreciation and amortization ............ 10,005 8,857 9,180
Provision for losses ..................... 1,337 1,579 --
Extraordinary gain ....................... -- (256) (1,437)
Equity in (income) loss of equity
investees .............................. (812) 20 1,083
Gain on sale of real estate .............. (21,404) (1,579) (5,822)
Distributions from operating cash flow
of equity investees .................... 687 649 666
(Increase) in interest receivable ........ (244) (5) (4)
Decrease in other assets ................. 3,740 1,759 1,098
Increase in interest payable ............. 165 200 635
(Decrease) in other liabilities .......... 2,344 (6,864) (451)
------------ ------------ ------------
Net cash provided by (used in) operating
activities ..................................... $ 8,417 $ (3,446) $ 1,222
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these Consolidated Financial
Statements.
42
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
TRANSCONTINENTAL REALTY INVESTORS, INC.
Dated: January 27, 1999 By: /s/ Randall M. Paulson
--------------------- ----------------------------------
Randall M. Paulson
President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the date indicated.
By: /s/ Ted P. Stokely
----------------------------------
Ted P. Stokely
Chairman of the Board
and Director
By: /s/ Richard W. Douglas By: /s/ Murray Shaw
--------------------------- -------------------------
Richard W. Douglas Murray Shaw
Director Director
By: /s/ Larry E. Harley By: /s/ Martin L. White
--------------------------- -------------------------
Larry E. Harley Martin L. White
Director Director
By: /s/ R. Douglas Leonhard By: /s/ Edward G. Zampa
--------------------------- -------------------------
R. Douglas Leonhard Edward G. Zampa
Director Director
Dated: January 27, 1999 By: /s/ Thomas A. Holland
------------------------ -------------------------
Thomas A. Holland
Executive Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
89
