U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
-------------------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
------------------ -----------------
Commission file number 0-4408
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RESOURCE AMERICA, INC.
-----------------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 72-0654145
- -------------------------- ------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1521 Locust Street, Philadelphia, Pennsylvania 19102
-------------------------------------------------------
(Address of principal executive offices)
(215) 546-5005
----------------------
(Issuer's telephone number)
------------------------------------------------------
(Former name, former address, and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 757,850
---------------------
<PAGE>
RESOURCE AMERICA, INC.
INDEX
PAGE
NUMBER
------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet (Unaudited) March 31, 1996,
and September 30, 1995 1 & 2
Consolidated Statement of Income (Unaudited) - Three
Months Ended March 31, 1996, and 1995 3
Consolidated Statement of Cash Flows (Unaudited) -
Three Months Ended March 31, 1996, and 1995 4
Notes to Consolidated Financial Statements (Unaudited) 5 - 10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11 - 13
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 14
<PAGE>
PART I. FINANCIAL INFORMATION
CONSOLIDATED BALANCE SHEET (UNAUDITED)
RESOURCE AMERICA, INC., AND SUBSIDIARIES
March 31, 1996, and September 30, 1995
=============================================================================
<TABLE>
<CAPTION>
March 31, September 30,
1996 1995
ASSETS ------------ -------------
<S> <C> <C>
Current Assets
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . $ 2,377,014 $ 2,457,432
Accounts and notes receivable . . . . . . . . . . . . . . . . . . . 1,797,952 1,303,556
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117,868 128,488
Prepaid expenses and other current assets . . . . . . . . . . . . . 416,528 34,557
------------ -------------
Total Current Assets . . . . . . . . . . . . . . . . 4,709,362 3,924,033
Property and Equipment
Oil and gas properties and equipment
(successful efforts). . . . . . . . . . . . . . . . . . . . . . . 24,062,632 24,039,762
Gas gathering and transmission facilities . . . . . . . . . . . . . 1,520,642 1,514,127
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,150,679 1,072,243
------------ -------------
26,733,953 26,626,132
Less - accumulated depreciation, depletion,
and amortization. . . . . . . . . . . . . . . . . . . . . . . . . (14,444,407) (14,043,455)
------------ -------------
Net Property and Equipment . . . . . . . . . . . . . . . . . . 12,289,546 12,582,677
Investments in Real Estate Loans . . . . . . . . . . . . . . . . . . . . . . 20,971,859 17,991,415
Restricted Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 994,410 904,409
Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,034,791 2,147,430
------------ -------------
40,999,968 37,549,964
============ =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
1
<PAGE>
CONSOLIDATED BALANCE SHEET (UNAUDITED)
RESOURCE AMERICA, INC., AND SUBSIDIARIES
March 31, 1996, and September 30, 1995
=============================================================================
<TABLE>
<CAPTION>
March 31, September 30,
1996 1995
-------------- ------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current Liabilities
Accounts payable - trade. . . . . . . . . . . . . . . . . . . . . . $ 366,853 $ 721,673
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . 539,857 516,066
Accrued income taxes. . . . . . . . . . . . . . . . . . . . . . . . - -
Current portion of long-term debt . . . . . . . . . . . . . . . . . 92,000 91,000
-------------- ------------------
Total Current Liabilities. . . . . . . . . . . . . . 998,710 1,328,739
Long-term Debt . . . . . . . . . . . . . . . . . . . . . . . . . . 8,483,058 8,522,682
Deferred Income Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,064,000 1,147,000
Commitments and Contingencies
Stockholders' Equity
Preferred stock, $1.00 par value, 1,000,000
authorized, none issued . . . . . . . . . . . . . . . . . . . . . - -
Common stock, $.01 par value, 3,500,000
authorized shares, 2,046,546 and 665,212
issued and outstanding shares (including
153,219 and 152,700 treasury shares) at
March 31, 1996, and September 30, 1995,
respectively. . . . . . . . . . . . . . . . . . . . . . . . . . . 20,465 8,179
Additional paid-in capital. . . . . . . . . . . . . . . . . . . . . 21,746,629 19,214,210
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . 10,871,721 10,532,719
Less cost of treasury shares. . . . . . . . . . . . . . . . . . . . (2,734,633) (2,721,437)
Less loan receivable from ESOP. . . . . . . . . . . . . . . . . . . (449,982) (482,128)
--------------- ---------------
Total Stockholders' Equity . . . . . . . . . . . . . 29,454,200 26,551,543
--------------- ---------------
$ 40,999,968 $ 37,549,964
=============== ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
RESOURCE AMERICA, INC., AND SUBSIDIARIES
Three Months and Six Months Ended March 31, 1996, and 1995
=============================================================================
<TABLE>
<CAPTION>
Three Months Six Months
Ended March 31, Ended March 31,
---------------------------------- ----------------------------------
1996 1995 1996 1995
--------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Revenues
Real estate finance. . . . . . . . . . . . . $ 1,866,202 $ 1,768,868 $ 3,951,323 $ 2,456,649
Equipment leasing. . . . . . . . . . . . . . 1,352,878 - 2,659,411 -
Energy : production. . . . . . . . . . . . 769,793 820,390 1,591,784 1,661,646
: services. . . . . . . . . . . . . 486,298 457,015 969,916 952,282
Interest . . . . . . . . . . . . . . . . . . 34,493 57,332 105,702 92,906
--------------- -------------- -------------- --------------
4,509,664 3,103,605 9,278,136 5,163,483
Costs and Expenses
Energy : exploration and production . . . 363,437 418,816 735,849 844,675
: services. . . . . . . . . . . . . 252,543 256,171 494,494 525,623
Real estate finance. . . . . . . . . . . . . 163,212 203,715 303,168 358,626
Equipment leasing. . . . . . . . . . . . . . 478,929 - 1,166,260 -
General and administrative . . . . . . . . . 550,879 773,327 1,004,721 1,186,551
Depreciation and amortization. . . . . . . . 298,907 337,424 708,765 680,049
Interest . . . . . . . . . . . . . . . . . . 214,159 319,536 428,725 539,626
Other - net. . . . . . . . . . . . . . . . . 3,231 182 1,152 (511)
--------------- -------------- -------------- --------------
2,325,297 2,309,171 4,843,134 4,134,639
--------------- -------------- -------------- --------------
Income from operations . . . . . . . . . . . 2,184,367 794,434 4,435,002 1,028,844
Other Income (Expense)
Gain (loss) on sale of property. . . . . . . 4,738 (2,291) 5,165 (1,458)
--------------- -------------- -------------- --------------
Income before income taxes . . . . . . . . . . . . 2,189,105 792,143 4,440,167 1,027,386
Provision for income taxes . . . . . . . . . . . . 634,000 119,000 1,287,000 154,000
--------------- -------------- -------------- --------------
Net income . . . . . . . . . . . . . . . . . $ 1,555,105 $ 673,143 $ 3,153,167 $ 873,386
=============== ============== ============== ==============
Net Income per Common Share. . . . . . . . . . . . $ .62 $ .32 $ 1.28 $ .42
=============== ============== ============== ==============
Weighted average common shares
outstanding. . . . . . . . . . . . . . . . . . . . 2,518,400 2,140,500 2,472,900 2,088,000
=============== ============== ============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
RESOURCE AMERICA, INC., AND SUBSIDIARIES
Six Months Ended March 31, 1996, and 1995
=============================================================================
<TABLE>
<CAPTION>
Six Months
Ended March 31,
----------------------------------------------
1996 1995
----------------- -----------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,153,167 $ 873,386
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . 708,765 680,049
Amortization of discount on senior note and
deferred finance costs. . . . . . . . . . . . . . . . . . . . . 37,325 36,700
Property impairments and abandonments . . . . . . . . . . . . . . 33,663 19,000
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . 917,000 159,000
Gain on dispositions and investments. . . . . . . . . . . . . . . (1,914,192) (833)
Change in operating assets and liabilities
net of effects from purchase of subsidiaries:
(Increase) decrease in accounts receivable. . . . . . . . . . . (494,396) 150,207
Increase in prepaid expenses and other current assets . . . . . (381,971) (172,439)
Decrease in accounts payable. . . . . . . . . . . . . . . . . . (354,820) (257,221)
Increase (decrease) in other current liabilities. . . . . . . . 23,790 (46,269)
Accretion of discount . . . . . . . . . . . . . . . . . . . . . (507,543) (300,592)
(Increase) decrease in inventory. . . . . . . . . . . . . . . . 10,620 (3,822)
----------------- -----------------
Net Cash Provided by Operating Activities . . . . . . . . . . . . 1,231,408 1,139,457
Investing Activities:
Capital expenditures. . . . . . . . . . . . . . . . . . . . . . . . (408,204) (457,847)
Proceeds from sale of assets. . . . . . . . . . . . . . . . . . . . 11,061,957 84,911
Increase in other assets. . . . . . . . . . . . . . . . . . . . . . (35,320) (12,854)
Investments in real estate loans. . . . . . . . . . . . . . . . . . (11,503,933) (12,335,779)
----------------- -----------------
Net Cash Used in Investing Activities . . . . . . . . . . . . . . (885,500) (12,721,569)
Financing Activities:
Short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . - 2,500,000
Long-term borrowings. . . . . . . . . . . . . . . . . . . . . . . . - 2,000,000
Dividends paid. . . . . . . . . . . . . . . . . . . . . . . . . . . (358,346) -
Principal payments on long-term debt. . . . . . . . . . . . . . . . (12,728) (11,400)
Proceeds from issuance of common stock. . . . . . . . . . . . . . . 82,001 -
(Increase) decrease in restricted cash. . . . . . . . . . . . . . . (90,001) 5,211,456
Purchase of treasury stock. . . . . . . . . . . . . . . . . . . . . (47,252) (95,603)
----------------- -----------------
Net Cash Provided by (Used in) Financing Activities . . . . . . . (426,326) 9,604,453
Decrease in cash and cash equivalents. . . . . . . . . . . . . . . . . . . . (80,418) (1,977,659)
Cash at beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . 2,457,432 2,597,556
----------------- -----------------
Cash at March 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,377,014 $ 4619,897
================= =================
</TABLE>
Supplemental disclosures of cash flow information:
Accounting policies: Cash includes highly liquid investments with a
maturity of three months or less.
Interest: Cash paid during the first six months of fiscal 1996 for:
Interest . . . . . . . . . . . . . . . . . .$397,651
Federal income taxes . . . . . . . . . .. .$370,000
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
=============================================================================
Note 1 - Management's Opinion Regarding Interim Financial Statements
In the opinion of management, all adjustments (consisting of normal
recurring accruals) necessary for a fair statement of the results of operations
for the interim period included herein have been made.
The accounting policies followed by the Company are set forth in
Note 1 to the Company's consolidated financial statements for the fiscal year
ended September 30, 1995, included in the Company's Annual Report on Form
10-KSB.
Note 2 - Transactions with Related Parties
A law firm in which an officer of the Company holds "of counsel"
status provides legal services to the Company. The Company believes that such
services are provided on terms no less favorable to the Company than those
which would be obtainable from third parties providing similar services.
The Company holds real estate loans with respect to twenty-one
properties owned by third parties. These properties are managed by a
corporation in which an officer of the Company is an officer and minority
shareholder. Management fees payable under the management agreements are
subordinated to receipt by the Company of minimum required debt service
payments under the loans.
The Company maintains depository and investment accounts in a bank
subsidiary of JeffBanks, Inc., in which the Chairman of the Company serves as a
director. The Chairman's wife is a director and executive officer of
JeffBanks, Inc.
Note 3 - Long-term Debt
Long-term debt consists of the following:
<TABLE>
March 31, September 30,
1996 1995
------------------ -------------------
<S> <C> <S> <C>
Mortgage note payable to a bank, secured by real estate,
monthly installments of approximately $3,300 including
interest at 3/4% above the prime rate through May 2002. . . . . . . $ 228,617 $ 241,347
Loan payable to a bank, 20 equal semiannual installments
of $32,143 and quarterly payments of interest at 84% of
the prime rate through July 1996, at which time the rate
converts to 1/2% above the prime rate through 2003. . . . . . . . . 449,982 482,128
9.5% senior secured note payable, interest due semi-
annually, principal due May 2004. . . . . . . . . . . . . . . . . . 7,896,459 7,890,207
------------------ -------------------
8,575,058 8,613,682
Less amounts payable in one year. . . . . . . . . . . . . . . . . . 92,000 91,000
------------------ -------------------
$ 8,483,058 $ 8,522,682
================== ===================
5
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
=============================================================================
The long-term debt maturing over the next five years is as follows:
1996 - $92,000; 1997 - $94,000; 1998 - $97,000; 1999 - $101,000; and
2000 - $105,000.
The senior secured note payable is collateralized by substantially all
of the Company's oil and gas properties. Certain credit agreements require the
Company to comply with certain restrictive covenants. At March 31, 1996, the
Company was in compliance with such covenants.
Note 4 - Formation of Limited Partnerships
In 1989 and 1990, the Company sponsored two pipeline income program
limited partnerships (the "1989 Program" and "1990 Program") which purchased
pipeline systems from the Company.
The Company had guaranteed that the limited partners in these programs
would receive cash distributions during each of the first two years of the
operation of the programs equal to 12% of their capital contributions to the
programs. To the extent that cash flow to the programs was less than 12%, the
Company contributed sufficient capital to allow the guaranteed distributions to
the limited partners to be made. The Company believes the amount contributed
for such distributions ($693,000), for which it is entitled to be repaid on a
preferential basis upon termination of the programs, will be realized upon
final disposition of the pipelines.
The limited partners in both programs have the right to sell their
interests in the programs to the Company following the fifth anniversary of the
respective program's closing at a price equal to 4.5 times the cash flow per
unit during the fifth year of partnership operations, subject to a maximum sale
price of $50,000 per unit. The limited partners may also cause the sale of the
pipelines after the fifth year of the respective partnership's operations. In
accordance with the terms of the limited partnership agreement, during fiscal
1995 the Company repurchased a total of 20 units from limited partners in the
1989 Program, for a total cost of approximately $240,000. The Company
purchased four units from limited partners in the 1990 program in the first
quarter of fiscal 1996 for approximately $38,000.
Note 5 - Investments in Real Estate
At March 31, 1996 the Company held real estate loans having aggregate face
values of $77,487,000 which were being carried at aggregate costs of
$20,972,000. The following is a summary of the changes in the carrying value
of the Company's investments in real estate loans for the six months ended
March 31, 1996:
</TABLE>
<TABLE>
<S> <C>
Balance, September 30, 1995 $ 17,991,415
New real estate loans 10,800,484
Additions to existing loans 744,408
Accretion of discount 507,543
Gains on sale of loan participations and
refinancings (revenue contribution) 1,909,027
Proceeds (cash):
Refinancings (6,612,000)
Participations (4,369,000)
-----------------
Balance, March 31, 1996 $ 20,971,877
=================
</TABLE>
6
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
=============================================================================
Investments in real estate loans at March 31 consist of:
<TABLE>
<CAPTION>
March 31, September 30,
1996 1995
------------------- -----------------
<S> <C> <C>
Property 001 Subordinated wraparound note, face value of
$4,500,000, secured by residential real estate
located in Pittsburgh, PA, interest at 14.5%,
due December 31, 2002 . . . . . . . . . . . . . . . . . $ 2,383,558 $ 2,334,850
Property 002 Mortgage note, face value of $1,080,000,
secured by residential real estate located in
Philadelphia, PA, interest at 12%, due October
31, 1998. In June 1995, the Company sold a
senior participation in this mortgage for
$600,000, resulting in a remaining face value
due the Company of $797,000 . . . . . . . . . . . . . . 179,086 147,972
Property 003 Mortgage note, face value of $1,312,000,
secured by residential real estate located in
Philadelphia, PA, interest at 2 1/2% over the
monthly national median annualized cost of
funds for SAIF-insured institutions as
announced by the Federal Deposit Insurance
Corporation, due October 31, 1998. In June
1995, the Company sold a senior participation
in this mortgage for $896,000, resulting in a
gain of $209,000 and a remaining face value
due the Company of $479,000 . . . . . . . . . . . . . . 202,264 189,347
Property 004 Mortgage note, face value of $4,234,000,
secured by commercial real estate located in
Pittsburgh, PA, interest at 10.6%, due February
7, 2001. In June 1995, the Company sold a
senior participation in this mortgage for
$840,000, resulting in a gain of $146,000 and
a remaining face value due the Company of
$3,498,000. In February 1996, the property was
transferred to a third party, subject to this
existing mortgage, the Company received $500,000
in satisfaction of a second mortgage on this
property resulting in a gain of $442,000. . . . . . . . 1,085,281 675,805
<CAPTION>
7
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
=============================================================================
<S> <C> <C>
Property 005 Note, face value of $3,559,000, secured by
an unrecorded deed relating to real estate
located in Philadelphia, PA, interest at 2%
over the yield of one-year United States
Treasury securities, due July 31, 1998. . . . . . . . . 715,300 724,422
Property 006 Mortgage note, face value of $1,798,000,
secured by residential real estate located in
Margate, NJ, interest at the Chase Manhattan
Bank prime rate (but not less than 9% nor
greater than 15.5%), due January 1, 2003. In
June 1995, the Company sold a senior
participation in this mortgage for $685,000,
resulting in a remaining face value due the
Company of $1,370,000 . . . . . . . . . . . . . . . . . 447,607 424,749
Property 007 Note, face value of $1,776,000, secured by a
judgment lien, relating to real estate located in
St. Cloud, MN, interest at 10%, due December
31, 2014. . . . . . . . . . . . . . . . . . . . . . . . 507,191 489,196
Property 008 Note, face value of $4,183,000, interest at 1/2%
over the Maryland National Bank prime rate,
due October 31, 1998. . . . . . . . . . . . . . . . . . 1,520,480 1,469,899
Property 009 Subordinated wraparound note, face value of
$12,000,000 consisting of a first mortgage held
by the Company of $9,000,000 secured by
commercial real estate located in Washington,
D.C., a note and a $3,000,000 second
mortgage held by an unrelated party, interest
at 12%, due November 30, 1998. In October
1995, the owner of the property refinanced the
property with an an unaffiliated party, simultaneously
paying the Company $6,487,000 toward
principal and interest on this loan . . . . . . . . . . 3,144,207 9,252,716
8
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
=============================================================================
<S> <C> <C>
Property 010 Mortgage note, face value of $1,211,000,
secured by residential real estate located in
Philadelphia, PA, interest at 3% over the
Federal Home Loan Bank of Pittsburgh rate,
due September 2, 1999. In June 1995, the
Company sold a senior participation in this
mortgage for $600,000, resulting in a remaining
face value due the Company of $827,000. . . . . . . . . 112,384 107,450
Property 011 Mortgage note, face value of $900,000, secured
by commercial real estate located in
Washington, D.C., interest at 1 1/2% over the
First Union National Bank rate, due September
30, 1999. In June 1995, the Company sold a
senior participation in this mortgage for
$685,000, resulting in a remaining face value
due the Company of $345,000 . . . . . . . . . . . . . . 311,393 289,504
Property 012 Note, face value of $736,000, interest at 2%
over the Mellon Bank prime rate, due October
31, 1999. . . . . . . . . . . . . . . . . . . . . . . . 523,917 545,077
Property 013 Mortgage notes, face value of $1,962,000,
secured by residential real estate located in
Philadelphia, PA, varying interest rates from
9 1/2% to 14.5%, due December 2, 1999. In
June 1995, the Company sold a senior
participation in this mortgage for $1,160,000,
resulting in a remaining face value due the
Company of $1,096,000 . . . . . . . . . . . . . . . . . 291,396 195,092
Property 014 Mortgage note, face value of $3,000,000,
secured by commercial real estate located in
Pasadena, CA, interest at 2.75% over the
average cost of funds to FSLIC-insured savings
and loan associations, 11th District (but not less
than 5.5% nor greater than 15.5%), due May
1, 2001. In September, 1995, the Company
sold a senior participation in this mortgage for
$2,000,000 resulting in a remaining face value
due the Company of $1,004,000 . . . . . . . . . . . . . 298,374 295,608
9
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
=============================================================================
<S> <C> <C>
Property 015 Subordinated wraparound note, face value of
$3,500,000, secured by residential real estate
located in North Concord, NC, interest at 12%,
due August 25, 2000 . . . . . . . . . . . . . . . . . . 251,679 146,765
Property 016 Wraparound note, face value of $5,198,000,
secured by real estate located in Rancho
Cordova, CA, interest at 8.5%, due December
31, 2019. In November 1995, the Company
bought the underlying first mortgage for
$1,328,000 and sold a senior participation in
this mortgage for $2,400,000 resulting in a
gain of $799,000 and a remaining face value
due the Company of $4,143,000 . . . . . . . . . . . . . 404,295 702,963
Property 017 Mortgage note, face value of $4,627,000,
secured by residential real estate located in
Philadelphia, PA, interest at 7.75%, due
September 12, 1998. . . . . . . . . . . . . . . . . . . 3,944,060 -
Property 018 Mortgage note, face value of $2,271,000,
secured by commercial real estate located in
Northridge, CA, interest at 9%, due
December 27, 2000. In December 1995, the
Company sold a senior participation in this
mortgage for $1,969,000 resulting in a gain of
$538,000 and a remaining face value due the
Company of $743,000 . . . . . . . . . . . . . . . . . . 685,945 -
Property 019 Subordinated wraparound note, face value of
$3,300,000 secured by commercial real estate
located in Elkins, WV, interest at 13.6%, due
in equal installments through December 31,
2018. . . . . . . . . . . . . . . . . . . . . . . . . . 360,355 -
Property 020 Mortgage note, face value of $4,800,000
secured by real estate located in Cherry Hill,
NJ, interest at ___%, due February 7, 2001. . . . . . . 2,715,935 -
<CAPTION>
10
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
=============================================================================
<C> <C>
Property 021 Mortgage notes, face value of $3,269,000,
secured by real estate located in Philadelphia,
PA, interest at 12%, due March 15, 2001 . . . . . . . . 887,171 -
----------------- -----------------
$ 20,971,878 $ 17,991,415
================= =================
As referenced above, in December 1995, the Company sold senior participations
in two real estate loans to an insurance company, pursuant to which the Company
agreed to replace any non-performing loan with a similar but performing loan.
In addition, the Company issued to the insurance company warrants to purchase
65,535 shares of the Company's common stock at the price of $11.75 per share.
Further, as referenced above, owners of two properties on which the Company
held a mortgage note refinanced those properties with unaffiliated parties.
The Company received payments of principal and interest on these notes.
Note 6 - Stock Dividends
On December 20, 1995 and March 12, 1996 the Board of Directors declared 6%
stock dividends of the Company's Class A common stock payable on January 31,
1996 and April 30, 1996, to shareholders of record on January 17, 1996 and
April 16, 1996, respectively. On May 9, 1996, the Board of Directors
authorized a five-for-two stock split effected in the form of a 150% stock
dividend payable on May 31, 1996 to shareholders of record on May 20, 1996.
This will result in the issuance of 1,135,996 additional shares of Class A
common stock. Earnings per share and weighted average shares outstanding have
been restated to reflect the above transactions.
11
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Revenues
Real estate finance revenues represent interest and fees earned and
gains recognized on real estate loans owned by the Company. Real estate
finance revenues increased to $1,866,000 (6%) in the quarter and $3,951,000
(61%) in the six months ended March 31, 1996 compared to the prior year. This
increase was attributable to gains recognized on the refinancing and sale of
participations in loans held by the Company. A comparison of the Company's
revenues from real estate follows:
Quarter Ended Six Months Ended
March 31, March 31,
-------------------- ----------------------
Revenues (in thousands) 1996 1995 1996 1995
- -----------------------------------------------------------------------------
Interest $ 799 $ 866 $1,383 $1,554
Fees 605 903 659 903
Gains 462 - 1,909 -
------ ------ ------ ------
$1,866 $1,769 $3,951 $2,457
During the quarter and six months ended March 31, 1996, the Company
purchased four and six real estate loans, respectively, for a total cost of
$3,414,000 and $10,800,000, respectively. During the quarter and six months
ended March 31, 1995, the Company invested $8,000,000 in one loan and
$12,985,000 in five loans, respectively. In addition, the Company added
$549,000 and $744,000 in the quarter and six months ended March 31, 1996,
compared to $199,000 and $259,000 in the similar periods of the prior year.
All of the loans were purchased at a discount to the original face value. The
Company intends to pursue similar real estate investment opportunities as they
become available to the extent allowed by the Company's investment capability.
Equipment leasing represents fees associated with managing limited
partnerships in which the Company is a general partner as well as lease
brokerage fees and the Company's pro rata share of income from these
partnerships. The Company acquired this business in September, 1995.
Production revenues for the quarter and six months ended March 31,
1996 decreased 6% and 4%. respectively, compared to the same periods of the
previous year. A comparison of the Company's revenues, daily production
volumes, and average sales prices follows:
Quarter Ended Six Months Ended
March 31, March 31,
Revenues (in thousands) 1996 1995 1996 1995
---------------------------------------------------------------------------
Gas $ 606 $ 675 $ 1,286 $ 1,376
Oil 143 131 277 262
Production Volumes
---------------------------------------------------------------------------
Gas (Mcf/day) 2,935 3,167 3,168 3,175
Oil (Bbls/day) 90 89 88 87
Average Sales Price
---------------------------------------------------------------------------
Gas (per Mcf) $ 2.27 $ 2.37 2.22 2.38
Oil (per Bbl) 17.44 16.24 17.08 16.55
12
<PAGE>
Natural gas revenues decreased 10% due to a 4% decrease in the average
price per mcf of natural gas and a 6% decrease in production volumes for the
quarter ended March 31, 1996, as compared to the prior year. For the six
months ended March 31, 1996, natural gas revenues decreased 7% due to a 7%
decrease in production volumes, as compared to the prior year. Oil revenues
increased by 9% due to a 2% increase in production volumes and a 7% increase in
the average price received per barrel of oil for the quarter ended March 31,
1996, as compared to the prior year. For the six months ended March 31, 1996,
oil revenues increased 5% due to a 2% increase in production volumes and a 3%
increase in the average price received per barrel of oil, as compared to the
prior year.
Natural gas production volumes in the Company's New York field of
operations for the quarter and six months were down 29% and 21%, respectively,
due to the natural decline in production from existing wells. Production
volumes in the Company's Ohio fields of operation increased 3% for the quarter
and 9% for the six months ended March 31, 1996 compared to the same periods of
the prior year as a result of the acquisition of additional interests in
existing wells from limited partners and other third parties. The Company
spent a total of $756,000 in the prior two years to acquire these interests.
The Company also participated in the drilling of three successful exploratory
wells and recompleted one successful developmental well during fiscal 1995.
During the first half of fiscal 1996 the Company participated in the drilling
of two successful developmental wells and intends to participate in the
drilling of additional wells during the remainder of fiscal 1996.
The Company's oil and gas revenues have been and will continue to be
affected by changes in oil and gas prices. The Company is unable to control or
accurately predict these changes in prices. The Company's proved developed
reserves are predominantly natural gas.
Costs and Expenses
Exploration and production expenses decreased $55,000 (13%) for the
quarter and $109,000 (13%) for the six months ended March 31, 1996, compared to
the prior year. These decreases were primarily attributable to decreased
cleanout and workover costs as compared to the same periods of the prior year.
Real estate finance expenses decreased 20% for the quarter and 15% for
the six months ended March 31, 1996, compared to the same periods a year ago.
These decreases are a result of lower legal costs associated with the Company's
real estate financing activities.
Equipment leasing expenses include costs incurred in the managment of
equipment leasing partnerships in which the Company is a general partner. In
accordance with the terms of the related partnership agreements, the Company
is reimbursed by the partnerships for certain general and administrative
expenses incurred and allocable, directly or indirectly, to the partnerships.
Such reimbursements are included in equipment leasing revenue.
13
<PAGE>
Depreciation and amortization consists primarily of amortization of
oil and gas properties which, as a percentage of oil and gas revenues,
decreased from 28% to 21% in the quarter and 28% to 27% in the first six
months of fiscal 1996 as compared to the prior year. Variations from period to
period are attributable to changes in the Company's oil and gas reserve
quantities, product prices, and fluctuations in the depletable costs basis of
oil and gas properties.
Liquidity and Capital Resources
The Company had $2,377,000 in cash and cash equivalents on hand at
March 31, 1996. The Company's ratio of current assets to current liabilities
was 4.7:1 on March 31, 1996, up from 2.9:1 at September 30, 1995. Working
capital at March 31, 1996 was $3,710,000, up from $2,595,000 at September 30,
1995.
Cash provided by operating activities increased $92,000 (8%) in the
first half of fiscal 1996 as compared to the prior year. This increase was the
result of an increase in net income, partially offset by changes in net working
capital.
The Company invested $10,800,000 in the acquisition of six real estate
loans and advanced $744,000 on existing loans held by the Company during the
first six months of fiscal 1996 as compared to the investment of $12,985,000 in
the acquisition of five real estate loans and $259,000 in advances during the
similar prior periods. In addition, the Company sold senior participations in
two loans and received proceeds upon the refinancing of two loans amounting to
$10,981,000 in the first six months of fiscal 1996. No such proceeds were
received in the prior fiscal year. As a result, the Company's net cash used in
investing activities decreased $11,836,000 during the first quarter of fiscal
1996, as compared to the prior year.
The Company's cash flow provided by financing activities decreased
$10,031,000 during the first half of fiscal 1996 as compared to the prior year.
During the first half of fiscal 1995, the Company (i) sold a $2,000,000 note,
(ii) borrowed $2,500,000 and (iii) by pledging substantially all of the
Company's oil and gas properties as collateral security for the Company's May
1995 $8,000,000 senior secured note, was able to make available for corporate
investment purposes $5,211,000 in previously restricted cash. In addition, the
Company resumed the payment of dividends in the fourth quarter of fiscal 1995
and paid $358,000 in dividends the first half of fiscal 1996.
The Company's capital spending is predominantly discretionary--the
ultimate level of spending will depend on, among other things, the Company's
assessment of investment opportunities in the real estate finance, energy and
equipment leasing industries. In real estate, the Company will continue to
expand its real estate loan portfolio as, and when, economically attractive
opportunities become available. In energy, the Company will seek to add to its
reserve base through selected acquisition of producing properties and further
development of the Company's mineral interests.
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits:
11.1 Calculation of Primary and Fully Diluted Earnings per share.
27 Financial Data Schedule
b) Reports on Form 8-K:
There were no Reports on Form 8-K filed by the Company for the
quarter ending March 31, 1996.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RESOURCE AMERICA, INC.
(Registrant)
Date May 14, 1996 By /s/ Michael L. Staines
---------------------- --------------------------------------
Michael L. Staines
Senior Vice President and Secretary
Date May 14, 1996 By /s/ Nancy J. McGurk
---------------------- --------------------------------------
Nancy J. McGurk
Vice President - Finance and
Treasurer
<PAGE>
</TABLE>
EXHIBIT 11.1
CALCULATION OF PRIMARY AND FULLY
DILUTED EARNINGS PER SHARE
Earnings per common share and common share equivalent are determined by
dividing net income by the weighted average number of common shares and
common share equivalents outstanding during each period. Common share
equivalents consist of common shares issuable upon the exercise of stock
options, provided the effect is dilutive, less common shares assumed to have
been purchased with the proceeds therefrom. Provided below is a table
reconciling common stock outstanding to common stock and common stock
equivalents used to compute earnings per share:
<TABLE>
<CAPTION>
Three Months Six Months
Ended March 31, Ended March 31,
----------------------- ----------------------
Primary 1996 1995 1996 1995
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
Weighted average number of common
shares outstanding 1,895,500 1,910,200 1,889,300 1,914,600
Assuming exercise of options and
warrants reduced by the number
of shares which could have been
purchased with the proceeds from
exercise of such options and warrants 622,900 230,300 583,600 173,400
---------- ---------- ---------- ---------
2,518,400 2,140,500 2,472,900 2,088,000
Fully Diluted<F1>
------------------
Weighted average number of common
shares outstanding 1,895,500 1,910,200 1,889,300 1,914,600
Assuming exercise of options and
warrants reduced by the number
of shares which could have been
purchased with the proceeds from
exercise of such options and warrants 649,000 230,300 596,600 173,400
---------- ---------- ---------- ---------
2,544,500 2,140,500 2,485,900 2,088,000
<FN>
<F1> This calculation is submitted in accordance with Securities
Exchange Act of 1934 Release no. 9083 although not required by
footnote 2 to paragraph 14 of APB Opinion no. 15 because it results
in dilution of less than 3%.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> MAR-31-1996
<CASH> 2,377,014
<SECURITIES> 0
<RECEIVABLES> 1,797,952
<ALLOWANCES> 0
<INVENTORY> 117,868
<CURRENT-ASSETS> 4,709,362
<PP&E> 26,733,953
<DEPRECIATION> 14,444,407
<TOTAL-ASSETS> 40,999,968
<CURRENT-LIABILITIES> 998,710
<BONDS> 8,483,058
0
0
<COMMON> 20,465
<OTHER-SE> 40,979,503
<TOTAL-LIABILITY-AND-EQUITY> 40,999,968
<SALES> 1,591,784
<TOTAL-REVENUES> 9,278,136
<CGS> 735,849
<TOTAL-COSTS> 4,843,134
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 428,725
<INCOME-PRETAX> 4,440,167
<INCOME-TAX> 1,287,000
<INCOME-CONTINUING> 3,153,167
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,153,167
<EPS-PRIMARY> 1.28
<EPS-DILUTED> 1.27
</TABLE>
