<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
--------------------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-4408
------------------------
RESOURCE AMERICA, INC.
-----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 72-0654145
- ------------------------------- -----------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1521 Locust Street, Philadelphia, Pennsylvania 19102
-----------------------------------------------------
(Address of principal executive offices)
(215) 546-5005
---------------------------
(Issuer's telephone number)
--------------------------------------------------------
(Former name, former address, and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date: 1,894,410
-------------
<PAGE>
RESOURCE AMERICA, INC.
INDEX
PAGE
NUMBER
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet (Unaudited) June 30, 1996,
and September 30, 1995 1 & 2
Consolidated Statement of Income (Unaudited) - Three
Months and Nine Months Ended
June 30, 1996, and 1995 3
Consolidated Statement of Cash Flows (Unaudited) -
Nine Months Ended June 30, 1996, and 1995 4
Notes to Consolidated Financial Statements (Unaudited) 5 - 12
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13 - 15
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 16
<PAGE>
PART I. FINANCIAL INFORMATION
CONSOLIDATED BALANCE SHEET (UNAUDITED)
RESOURCE AMERICA, INC., AND SUBSIDIARIES
June 30, 1996, and September 30, 1995
===============================================================================
June 30, September 30,
1996 1995
-------------- --------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents . . . . . . . . . $ 4,224,835 $ 2,457,432
Accounts and notes receivable . . . . . . . 3,088,775 1,303,556
Inventory . . . . . . . . . . . . . . . . . 118,674 128,488
Prepaid expenses and other current assets . 377,221 34,557
-------------- --------------
Total Current Assets . . . . . . . . . 7,809,505 3,924,033
PROPERTY AND EQUIPMENT
Oil and gas properties and equipment
(successful efforts) . . . . . . . . . . 24,128,444 24,039,762
Gas gathering and transmission facilities . 1,527,723 1,514,127
Other . . . . . . . . . . . . . . . . . . . 1,422,378 1,072,243
-------------- --------------
27,078,545 26,626,132
Less - accumulated depreciation, depletion,
and amortization . . . . . . . . . . . . (14,735,052) (14,043,455)
-------------- --------------
Net Property and Equipment . . . . . . 12,343,493 12,582,677
INVESTMENTS IN REAL ESTATE LOANS . . . . . . 19,082,740 17,991,415
RESTRICTED CASH . . . . . . . . . . . . . . . 994,851 904,409
OTHER ASSETS . . . . . . . . . . . . . . . . 2,041,605 2,147,430
-------------- --------------
$ 42,272,194 $ 37,549,964
============== ==============
The accompanying notes are an integral part of these financial statements.
1
<PAGE>
CONSOLIDATED BALANCE SHEET (UNAUDITED)
RESOURCE AMERICA, INC., AND SUBSIDIARIES
June 30, 1996, and September 30, 1995
================================================================================
June 30, September 30,
1996 1995
-------------- ---------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable - trade. . . . . . . . . . $ 495,741 $ 721,673
Accrued liabilities . . . . . . . . . . . . 322,660 516,066
Current portion of long-term debt . . . . . 93,000 91,000
-------------- --------------
Total Current Liabilities. . . . . . . 911,401 1,328,739
LONG-TERM DEBT . . . . . . . . . . . . . . . 8,478,374 8,522,682
DEFERRED INCOME TAXES . . . . . . . . . . . . 2,367,000 1,147,000
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock, $1.00 par value,
1,000,000 authorized, none issued . . . . - -
Common stock, $.01 par value, 3,500,000
authorized shares, 1,894,410 and 665,212
issued and outstanding shares (including
151,800 and 152,700 treasury shares) at
June 30, 1996, and September 30, 1995,
respectively . . . . . . . . . . . . . . 20,463 8,179
Additional paid-in capital. . . . . . . . . 21,767,988 19,214,210
Retained earnings . . . . . . . . . . . . . 11,885,363 10,532,719
Less cost of treasury shares. . . . . . . . (2,708,413) (2,721,437)
Less loan receivable from ESOP. . . . . . . (449,982) (482,128)
-------------- --------------
Total Stockholders' Equity . . . . . . 30,515,419 26,551,543
-------------- --------------
$ 42,272,194 $ 37,549,964
============== ==============
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
RESOURCE AMERICA, INC., AND SUBSIDIARIES
Three Months and Nine Months Ended June 30, 1996, and 1995
===============================================================================
<TABLE>
<CAPTION>
Three Months Nine Months
Ended June 30, Ended June 30,
----------------------------- ------------------------------
1996 1995 1996 1995
------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
REVENUES
Real estate finance . . . . . . . . . . . $ 1,628,919 $ 1,983,164 $ 5,580,242 $ 4,439,813
Equipment leasing . . . . . . . . . . . . 1,126,132 - 3,785,543 -
Energy: production. . . . . . . . . . . . 932,879 823,400 2,524,663 2,485,046
: services. . . . . . . . . . . . . 447,823 581,189 1,417,739 1,533,471
Interest . . . . . . . . . . . . . . . . 36,047 9,178 141,749 102,084
------------- ------------- -------------- -------------
4,171,800 3,396,931 13,449,936 8,560,414
COSTS AND EXPENSES
Energy: exploration and production . . . 398,249 392,369 1,134,098 1,237,044
: services . . . . . . . . . . . . 239,925 254,627 734,419 780,250
Real estate finance . . . . . . . . . . . 108,560 296,215 411,728 654,841
Equipment leasing . . . . . . . . . . . . 540,791 - 1,707,051 -
General and administrative . . . . . . . 593,059 642,203 1,597,780 1,828,754
Depreciation and amortization . . . . . . 350,480 365,399 1,059,245 1,045,448
Interest . . . . . . . . . . . . . . . . 214,041 304,651 642,766 844,277
Other - net . . . . . . . . . . . . . . . (6,323) (3,121) (5,171) (3,632)
------------- ------------- -------------- -------------
2,438,782 2,252,343 7,281,916 6,386,982
------------- ------------- -------------- -------------
INCOME FROM OPERATIONS . . . . . . . . . 1,733,018 1,144,588 6,168,020 2,173,432
OTHER INCOME
Gain on sale of property . . . . . . . . 2,000 2,749 7,165 1,291
------------- ------------- -------------- -------------
Income before income taxes . . . . . . . . 1,735,018 1,147,337 6,175,185 2,174,723
Provision for income taxes . . . . . . . . 503,000 218,000 1,790,000 372,000
------------- ------------- -------------- -------------
NET INCOME . . . . . . . . . . . . . $ 1,232,018 $ 929,337 $ 4,385,185 $ 1,802,723
============= ============= ============== =============
NET INCOME PER COMMON SHARE -
PRIMARY . . . . . . . . . . . . . . . . . $ .46 $ .42 $ 1.72 $ .86
============= ============= ============== =============
Weighted average common shares
outstanding . . . . . . . . . . . . . . . 2,705,600 2,183,000 2,549,000 2,120,000
============= ============= ============== =============
NET INCOME PER COMMON SHARE -
FULLY DILUTED . . . . . . . . . . . . . . $ .46 $ .42 $ 1.64 $ .82
============= ============= ============== =============
Weighted average common shares
outstanding . . . . . . . . . . . . . . . 2,705,600 2,183,000 2,675,000 2,189,000
============= ============= ============== =============
</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
Nine Months Ended June 30, 1996, and 1995
================================================================================
<TABLE>
<CAPTION>
Nine Months
Ended June 30,
-------------------------------
1996 1995
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . . . . . $ 4,385,185 $ 1,802,723
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization . . . . . . . . . . . . . 1,059,245 1,045,448
Amortization of discount on senior note and
deferred finance costs . . . . . . . . . . . . . . . 55,987 55,361
Property impairments and abandonments . . . . . . . . . 36,662 38,500
Deferred income taxes . . . . . . . . . . . . . . . . . 1,220,000 216,000
Gain on dispositions and investments . . . . . . . . . (3,432,951) (1,231,027)
Accretion of discount . . . . . . . . . . . . . . . . . (776,488) 23,918
Change in operating assets and liabilities:
(Increase) decrease in accounts receivable . . . . . (1,785,219) 250,411
Increase in prepaid expenses and
other current assets . . . . . . . . . . . . . . . . (342,664) (139,638)
Decrease in accounts payable . . . . . . . . . . . . (225,932) (292,177)
Decrease in other current liabilities . . . . . . . . (193,407) (155,859)
(Increase) decrease in inventory . . . . . . . . . . 9,814 (4,007)
-------------- --------------
NET CASH PROVIDED BY OPERATING ACTIVITIES . . . . . . . 10,232 1,609,653
INVESTING ACTIVITIES:
Capital expenditures . . . . . . . . . . . . . . . . . . (766,154) (632,686)
Proceeds from sale of properties and investments . . . . 16,697,180 5,790,905
Increase in other assets . . . . . . . . . . . . . . . . (110,348) (32,107)
Additions to real estate loans . . . . . . . . . . . . . (13,459,113) (12,142,822)
-------------- ---------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES . . 2,361,565 (7,016,710)
FINANCING ACTIVITIES:
Short-term borrowings . . . . . . . . . . . . . . . . . . - 2,500,000
Long-term borrowings . . . . . . . . . . . . . . . . . . - 2,000,000
Dividends paid . . . . . . . . . . . . . . . . . . . . . (567,879) -
(Increase) decrease in restricted cash . . . . . . . . . (90,442) 3,883,268
Principal payments on debt . . . . . . . . . . . . . . . (19,538) (2,517,541)
Purchase of treasury stock . . . . . . . . . . . . . . . (47,258) (95,603)
Proceeds from issuance of common stock . . . . . . . . . 120,723 -
-------------- --------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES . . (604,394) 5,770,124
INCREASE IN CASH AND CASH EQUIVALENTS . . . . . . . . . . . 1,767,403 363,067
CASH AT BEGINNING OF YEAR . . . . . . . . . . . . . . . . . 2,457,432 2,597,556
------------- --------------
CASH AT JUNE 30 . . . . . . . . . . . . . . . . . . . . . . $ 4,224,835 $ 2,960,623
============= ==============
</TABLE>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Accounting policies: Cash includes highly liquid investments with a
maturity of three months or less.
Cash paid during the first nine months of 1996 for interest: $776,780
Cash paid during the first nine month of 1996 for federal
income taxes: $570,000
The accompanying notes are an integral part of these financial statements.
4
<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
The Company holds real estate loans with respect to twenty-three
properties owned by third parties. These properties are managed by a
corporation in which an officer of the Company is an officer and minority
shareholder. Management fees payable under the management agreements are
subordinated to receipt by the Company of minimum required debt service
payments under the loans.
The Company maintains depository and investment accounts in a bank
subsidiary of JeffBanks, Inc., in which the Chairman of the Company serves as a
director. The Chairman's wife is a director and executive officer of
JeffBanks, Inc.
NOTE 3 - LONG-TERM DEBT
<TABLE>
<CAPTION>
Long-term debt consists of the following:
June 30, September 30,
1996 1995
------------ --------------
<S> <C> <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. . . . . . . $ 221,809 $ 241,347
Loan payable to a bank, 20 equal semiannual installments
of $32,143 and quarterly payments of interest at 84% of
the prime rate through July 1996, at which time the rate
converts to 1/2% above the prime rate through 2003. . . . . . . . . 449,982 482,128
9.5% senior secured note payable, interest due semi-
annually, principal due May 2004. . . . . . . . . . . . . . . . . . 7,899,583 7,890,207
------------ ------------
8,571,374 8,613,682
Less amounts payable in one year. . . . . . . . . . . . . . . . 93,000 91,000
------------ ------------
$ 8,478,374 $ 8,522,682
============ ============
</TABLE>
5
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
================================================================================
The long-term debt maturing over the next five years is as follows:
1996 - $93,000; 1997 - $94,000; 1998 - $97,000; 1999 - $101,000; and
2000 - $105,000.
The senior secured note payable is collateralized by substantially all of
the Company's oil and gas properties. Certain credit agreements require the
Company to comply with certain restrictive covenants. At June 30, 1996, the
Company was in compliance with such covenants.
NOTE 4 - FORMATION OF LIMITED PARTNERSHIPS
In 1989 and 1990, the Company sponsored two pipeline income program
limited partnerships (the "1989 Program" and "1990 Program") which purchased
pipeline systems from the Company.
The Company had guaranteed that the limited partners in these programs
would receive cash distributions during each of the first two years of the
operation of the programs equal to 12% of their capital contributions to the
programs. To the extent that cash flow to the programs was less than 12%, the
Company contributed sufficient capital to allow the guaranteed distributions to
the limited partners to be made. The Company believes the amount contributed
for such distributions ($693,000), for which it is entitled to be repaid on a
preferential basis upon termination of the programs, will be realized upon
final disposition of the pipelines.
The limited partners in both programs have the right to sell their
interests in the programs to the Company following the fifth anniversary of the
respective program's closing at a price equal to 4.5 times the cash flow per
unit during the fifth year of partnership operations, subject to a maximum sale
price of $50,000 per unit. The limited partners may also cause the sale of the
pipelines after the fifth year of the respective partnership's operations. In
accordance with the terms of the limited partnership agreement, during fiscal
1995 the Company repurchased a total of 20 units from limited partners in the
1989 Program, for a total cost of approximately $240,000. The Company
purchased four units from limited partners in the 1990 program in the first
quarter of fiscal 1996 for approximately $38,000.
NOTE 5 - INVESTMENTS IN REAL ESTATE
The Company has focused its real estate activities on the purchase of
income producing mortgages at a discount to the face value of such mortgages
and also to the appraised value of the collateral underlying the mortgage.
Cash received by the Company for payment on each mortgage is allocated between
principal and interest - the interest portion of the cash received is recorded
as income to the Company. Additionally, the Company records as income the
accrual of a portion of the discount to the underlying collateral value. This
"accretion of discount" amounted to $776,488 during the nine months ended
June 30, 1996. As the Company sells participations or receives funds from
refinancings in such mortgages, a portion of the cash received is employed to
reduce the cumulative accretion of discount included in the carrying value of
the Company's investment in real estate loans. At June 30, 1996 the Company
had investments in real estate loans totaling $19,082,740, including $1,972,500
in cumulative accretion of discount, with an aggregate receivable of
$82,657,000.
6
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
================================================================================
The following is a summary of the changes in the carrying value of the
Company's investments in real estate loans for the nine months ended
June 30, 1996:
Balance, September 30, 1995 $ 17,991,415
New real estate loans 12,061,599
Additions to existing loans 1,438,473
Accretion of discount 776,488
Gains on sale of loan participations and
refinancings (revenue contribution) 2,825,787
Proceeds (cash):
Refinancings (9,632,023)
Participations (6,379,000)
----------------
Balance, June 30, 1996 $ 19,082,740
================
Investments in real estate loans at June 30 consist of:
June 30, September 30,
1996 1995
Property 001 Subordinated wraparound note, face
value of $4,500,000, secured by
residential real estate located in
Pittsburgh, PA, interest at 14.5%,
due December 31, 2002 . . . . . . . $ 2,399,917 $ 2,334,850
Property 002 Mortgage note, face value of
$1,080,000, secured by residential
real estate located in Philadelphia,
PA, interest at 12%, due October 31,
1998. In June 1995, the Company
sold a senior participation in this
mortgage for $600,000, resulting in
a remaining face value due the
Company of $797,000 . . . . . . . . 178,486 147,972
Property 003 Mortgage note, face value of
$1,312,000, secured by residential
real estate located in Philadelphia,
PA, interest at 2 1/2% over the
monthly national median annualized
cost of funds for SAIF-insured
institutions as announced by the
Federal Deposit Insurance
Corporation, due October 31, 1998.
In June 1995, the Company sold a
senior participation in this
mortgage for $896,000, resulting in
a gain of $209,000 and a remaining
face value due the Company of
$479,000 . . . . . . . . . . . . . 225,811 189,347
7
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
================================================================================
Property 004 Mortgage note, face value of
$4,234,000, secured by commercial
real estate located in Pittsburgh,
PA, interest at 10.6%, due February
7, 2001. In June 1995, the Company
sold a senior participation in this
mortgage for $840,000, resulting in
a gain of $146,000 and a remaining
face value due the Company of
$3,498,000. In February 1996, the
property was transferred to a third
party, subject to this existing
mortgage, the Company received
$500,000 in satisfaction of a second
mortgage on this property resulting
in a gain of $442,000 . . . . . . . 1,063,149 675,805
Property 005 Note, face value of $3,559,000,
secured by an unrecorded deed
relating to real estate located in
Philadelphia, PA, interest at 2%
over the yield of one-year United
States Treasury securities, due
October 31, 1998 . . . . . . . . . 716,616 724,422
Property 006 Mortgage note, face value of
$1,798,000, secured by residential
real estate located in Margate, NJ,
interest at the Chase Manhattan Bank
prime rate (but not less than 9% nor
greater than 15.5%), due June 1,
1998. In June 1995, the Company
sold a senior participation in this
mortgage for $850,000. In June 1996,
the owner of the property refinanced
the property with an unaffiliated
party, simultaneously paying the
Company $850,000 toward the
principal and interest on this loan.
The proceeds from the refinancing
were used to pay off the existing
senior participation, resulting in a
remaining face value due the Company
of $1,632,000 . . . . . . . . . . . 478,018 424,749
Property 007 Note, face value of $1,776,000,
secured by a judgment lien, relating
to real estate located in St. Cloud,
MN, interest at 10%, due December
31, 2014 . . . . . . . . . . . . . 517,357 489,196
Property 008 Note, face value of $4,183,000,
interest at 1/2% over the Maryland
National Bank prime rate, due July
31, 1998 . . . . . . . . . . . . . 1,542,620 1,469,899
8
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
================================================================================
Property 009 Subordinated wraparound note, face
value of $12,000,000 consisting of a
first mortgage held by the Company
of $9,000,000 secured by commercial
real estate located in Washington,
D.C., a note and a $3,000,000 second
mortgage held by an unrelated party,
interest at 12%, due November 30,
1998. In October 1995, the owner of
the property refinanced the property
with an unaffiliated party,
simultaneously paying the Company
$6,487,000 toward principal and
interest on this loan . . . . . . . 3,164,101 9,252,716
Property 010 Mortgage note, face value of
$1,211,000, secured by residential
real estate located in Philadelphia,
PA, interest at 3% over the Federal
Home Loan Bank of Pittsburgh rate,
due September 2, 1999. In June
1995, the Company sold a senior
participation in this mortgage for
$600,000, resulting in a remaining
face value due the Company of
$827,000 . . . . . . . . . . . . . 112,902 107,450
Property 011 Mortgage note, face value of
$900,000, secured by commercial real
estate located in Washington, D.C.,
interest at 1 1/2% over the First
Union National Bank rate, due
September 30, 1999. In June 1995,
the Company sold a senior
participation in this mortgage for
$685,000, resulting in a remaining
face value due the Company of
$345,000 . . . . . . . . . . . . . 323,445 289,504
Property 012 Note, face value of $736,000,
interest at 2% over the Mellon Bank
prime rate, due October 31, 1999. . 520,101 545,077
Property 013 Mortgage notes, face value of
$1,962,000, secured by residential
real estate located in Philadelphia,
PA, varying interest rates from
9 1/2% to 14.5%, due December 2,
1999. In June 1995, the Company
sold a senior participation in this
mortgage for $1,160,000, resulting
in a remaining face value due the
Company of $1,096,000 . . . . . . . 509,238 195,092
9
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
================================================================================
Property 014 Mortgage note, face value of
$3,000,000, secured by commercial
real estate located in Pasadena, CA,
interest at 2.75% over the average
cost of funds to FSLIC-insured
savings and loan associations, 11th
District (but not less than 5.5% nor
greater than 15.5%), due May 1,
2001. In September, 1995, the
Company sold a senior participation
in this mortgage for $2,000,000
resulting in a remaining face value
due the Company of $1,004,000 . . . 299,131 295,608
Property 015 Subordinated wraparound note, face
value of $3,500,000, secured by
residential real estate located in
North Concord, NC, interest at 12%,
due August 25, 2000 . . . . . . . . 302,775 146,765
Property 016 Wraparound note, face value of
$5,198,000, secured by real estate
located in Rancho Cordova, CA,
interest at 8.5%, due December 31,
2019. In November 1995, the Company
bought the underlying first mortgage
for $1,328,000 and sold a senior
participation in this mortgage for
$2,400,000 resulting in a gain of
$799,000 and a remaining face value
due the Company of $4,143,000 . . . 412,144 702,963
Property 017 Mortgage note, face value of
$4,627,000, secured by residential
real estate located in Philadelphia,
PA, interest at 7.75%, due September
12, 1998. In April 1996, the owner
of the property refinanced the
property with an unaffiliated party,
simultaneously paying the Company
$3,020,024 toward principal and
interest on this loan . . . . . . . 873,794 -
Property 018 Mortgage note, face value of
$2,271,000, secured by commercial
real estate located in Northridge,
CA, interest at 9%, due December 27,
2000. In December 1995, the Company
sold a senior participation in this
mortgage for $1,969,000 resulting in
a gain of $538,000 and a remaining
face value due the Company of
$743,000 . . . . . . . . . . . . . 750,374 -
10
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
================================================================================
Property 019 Subordinated wraparound note, face
value of $3,300,000 secured by
commercial real estate located in
Elkins, WV, interest at 13.6%, due
in equal installments through
December 31, 2018 . . . . . . . . . 406,071 -
Property 020 Mortgage note, face value of
$4,800,000 secured by real estate
located in Cherry Hill, NJ, interest
at 10%, due February 7, 2001 . . . 2,766,164 -
Property 021 Mortgage notes, face value of
$3,269,000, secured by real estate
located in Philadelphia, PA,
interest at 12%, due March and
April, 2001. In June 1996, the
Company sold a senior participation
in this mortgage for $2,010,000,
resulting in a gain of $916,759 and
a face value due the Company of
$1,259,000 . . . . . . . . . . . . 375,293 -
Property 022 Subordinated mortgage note, face
value of $600,000, secured by real
estate located in Philadelphia, PA,
interest at 12%, due March 31,
2001 . . . . . . . . . . . . . . . 112,707 -
Property 023 Subordinated participation loan,
face value of $2,038,000, secured by
real estate located in Philadelphia,
PA, interest at 85% of the 30-day
rate on $100,000 Certificates of
Deposit as published by the Wall
Street Journal plus 2.75%, due
January 1, 1997 . . . . . . . . . . 1,032,526 -
------------ ------------
$ 19,082,740 $ 17,991,415
============ ============
As referenced above, in December 1995, the Company sold senior
participations in two real estate loans to an insurance company, pursuant to
which the Company agreed to replace any non-performing loan with a similar but
performing loan. In addition, the Company issued to the insurance company
warrants to purchase 184,088 shares of the Company's common stock at the price
of $4.18 per share.
Further, as referenced above, owners of three properties on which the
Company held a mortgage note refinanced those properties with unaffiliated
parties. The Company received payments of principal and interest on these
notes.
11
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
================================================================================
NOTE 6 - STOCK DIVIDENDS
On December 20, 1995 and March 12, 1996 the Board of Directors declared 6%
stock dividends of the Company's Class A common stock payable on January 31,
1996 and April 30, 1996, to shareholders of record on January 17, 1996 and
April 16, 1996, respectively. On May 9, 1996, the Board of Directors
authorized a five-for-two stock split effected in the form of a 150% stock
dividend payable on May 31, 1996 to shareholders of record on May 20, 1996.
These dividends resulted in the issuance of 1,219,167 additional shares of
Class A common stock. Earnings per share and weighted average shares
outstanding have been restated to reflect the above transactions.
12
<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 $5,580,242 (26%) in the nine months ended June 30, 1996
compared to the prior year. This increase was attributable to gains recognized
on the refinancing and sale of participations in loans held by the Company. A
comparison of the Company's revenues from real estate follows:
QUARTER ENDED NINE MONTHS ENDED
JUNE 30, JUNE 30,
------------------- --------------------
REVENUES (IN THOUSANDS) 1996 1995 1996 1995
----------------------------------------------------------------------
Interest $ 699 $ 753 $ 2,082 $ 2,307
Fees 13 - 672 903
Gains 917 1,230 2,826 1,230
------- ------- ------- -------
$ 1,629 $ 1,983 $ 5,580 $ 4,440
During the quarter and nine months ended June 30, 1996, the Company
purchased two and eight real estate loans, respectively, for a total cost of
$1,262,000 and $12,062,000, respectively. During the nine months ended June
30, 1995, the Company invested $12,985,000 in five loans. All of the loans
were purchased at a discount to the original face value. In addition, in the
quarter and nine months ended June 30, 1996, the Company advanced a further
$694,000 and $1,438,000 on prior loans compared to $508,000 and $767,000 in the
similar periods of the prior year.
Equipment leasing revenues arise from fees associated with managing
limited partnerships in which a subsidiary of the Company is a general partner
as well as lease brokerage fees and the Company's pro rata share of income from
these partnerships. The Company acquired this business in September, 1995.
Production revenues for the quarter and nine months ended June 30, 1996
increased 13% and 2%, respectively, compared to the same periods of the
previous year. A comparison of the Company's revenues, daily production
volumes, and average sales prices follows:
QUARTER ENDED NINE MONTHS ENDED
JUNE 30, JUNE 30,
------------------- -------------------
REVENUES (IN THOUSANDS) 1996 1995 1996 1995
-----------------------------------------------------------------------
Gas $ 705 $ 610 $ 1,991 $ 1,986
Oil 191 190 468 452
PRODUCTION VOLUMES
-----------------------------------------------------------------------
Gas (Mcf/day) 3,176 2,914 3,170 3,088
Oil (Bbls/day) 104 119 94 98
AVERAGE SALES PRICE
-----------------------------------------------------------------------
Gas (per Mcf) $ 2.44 $ 2.30 2.29 2.36
Oil (per Bbl) 20.20 17.58 18.23 16.96
13
<PAGE>
Natural gas production volumes in the Company's New York field of
operations for the quarter and nine months increased 10% and decreased 12%,
respectively, due to the natural decline in production from existing wells.
Production volumes in the Company's Ohio fields of operation increased 3% for
the quarter and 7% for the nine months ended June 30, 1996 compared to the same
periods of the prior year as a result of additional drilling into the Rose Run
formation. The Company participated in the drilling of five successful
exploratory wells and recompleted one successful developmental well during
fiscal 1995 and 1996. During the first nine months of fiscal 1996 the Company
participated in the drilling of two successful developmental wells and intends
to participate in the drilling of additional wells during the remainder of
fiscal 1996.
The Company's oil and gas revenues have been and will continue to be
affected by changes in oil and gas prices. The Company is unable to control or
accurately predict these changes in prices. The Company's proved developed
reserves are predominantly natural gas.
COSTS AND EXPENSES
Real estate finance expenses decreased 63% for the quarter and 37% for the
nine months ended June 30, 1996, compared to the same periods a year ago.
These decreases are a result of lower legal costs associated with the Company's
real estate financing activities.
Equipment leasing expenses include costs incurred in the management of
equipment leasing partnerships in which the Company is a general partner. In
accordance with the terms of the related partnership agreements, the Company is
reimbursed by the partnerships for certain general and administrative expenses
incurred and allocable, directly or indirectly, to the partnerships. Such
reimbursements are included in equipment leasing revenue.
Exploration and production expenses increased $6,000 (1%) for the quarter
and decreased $103,000 (8%) for the nine months ended June 30, 1996, compared
to the prior year. These decreases were primarily attributable to decreased
cleanout and workover costs as compared to the same periods of the prior year.
Depreciation and amortization consists primarily of amortization of oil
and gas properties which, as a percentage of oil and gas revenues, decreased
from 31% to 23% in the quarter and 29% to 25% in the first nine months of
fiscal 1996 as compared to the prior year. Variations from period to period
are attributable to changes in the Company's oil and gas reserve quantities,
product prices, and fluctuations in the depletable costs basis of oil and gas
properties.
LIQUIDITY AND CAPITAL RESOURCES
The Company had $4,225,000 in cash and cash equivalents on hand at June
30, 1996. The Company's ratio of current assets to current liabilities was
8.6:1 on June 30, 1996, up from 2.9:1 at September 30, 1995. Working capital
at June 30, 1996 was $6,898,000, up from $2,595,000 at September 30, 1995.
Cash provided by operating activities decreased $1,599,000 in the first
nine months of fiscal 1996 as compared to the prior year. This increase was
the result of changes in net working capital, partially offset by an increase
in net income.
14
<PAGE>
The Company invested $12,062,000 in the acquisition of eight real estate
loans and advanced $1,438,000 on existing loans held by the Company during the
first nine months of fiscal 1996 as compared to the investment of $12,985,000
in the acquisition of five real estate loans and $767,000 in advances during
the similar prior period. In addition, the Company sold senior participations
in three loans and received proceeds upon the refinancing of three loans
amounting to $16,011,000 in the first nine months of fiscal 1996. Senior
participations were sold in seven loans generating $5,431,000 in cash in the
similar prior period. As a result, the Company's net cash provided by
investing activities increased $9,404,000 during the first nine months of
fiscal 1996, as compared to the prior year.
The Company's cash flow used in financing activities increased $6,375,000
during the first nine months of fiscal 1996 as compared to the prior year.
During the first nine months of fiscal 1995, the Company (i) sold a $2,000,000
note, (ii) borrowed $2,500,000 and (iii) by pledging substantially all of the
Company's oil and gas properties as collateral security for the Company's May
1995 $8,000,000 senior secured note, was able to make available for corporate
investment purposes $3,883,000 in previously restricted cash. In addition, the
Company resumed the payment of dividends in the fourth quarter of fiscal 1995
and paid $568,000 in dividends the first nine months of fiscal 1996.
The Company's capital spending is predominantly discretionary--the
ultimate level of spending will depend on, among other things, the Company's
assessment of investment opportunities in the real estate finance, energy and
equipment leasing industries. In real estate, the Company will continue to
expand its real estate loan portfolio as, and when, economically attractive
opportunities become available. In energy, the Company will seek to add to its
reserve base through selected acquisition of producing properties and further
development of the Company's mineral interests.
15
<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 June 30, 1996.
16
<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 August 13, 1996 By /s/ Michael L. Staines
-------------------------- ---------------------------------------
Michael L. Staines
Senior Vice President and Secretary
Date August 13, 1996 By /s/ Nancy J. McGurk
-------------------------- ---------------------------------------
Nancy J. McGurk
Vice President - Finance and
Treasurer
17
<PAGE>
EXHIBIT 11.1
CALCULATION OF PRIMARY AND FULLY
DILUTED EARNINGS PER SHARE
PRIMARY EARNINGS PER SHARE
<TABLE>
<CAPTION>
Computation for Statement of Operations
Three Months Ended Nine Months Ended
Reconciliation of net income per statement of operations to amount June 30, June 30,
used in primary earnings per share computation: 1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net income $ 1,232,018 $ 929,337 $ 4,385,185 $ 1,802,723
Add-Interest on short-term debt, net of tax effect, on application
of assumed proceeds from exercise of options and
warrants in excess of 20% limitation - - - 34,098
Net income, as adjusted $ 1,232,018 $ 929,337 $ 4,385,185 $ 1,827,548
Additional Primary Computation
Net income, as adjusted per primary computation above $ 1,232,018 $ 929,337 $ 4,385,185 $ 1,827,548
Additional adjustment to weighted average number of
shares outstanding:
Weighted average number of shares outstanding 1,893,900 1,906,000 1,889,500 1,912,100
Add-Dilutive effect of outstanding options and warrants
(as determined by the application of the treasury
stock method) 811,700 277,000 659,500 207,900
Weighted average number of shares outstanding 2,705,600 2,183,000 2,549,000 2,120,000
Primary earnings per share, as adjusted $ .46 $ .42 $ 1.72 $ .86
FULLY DILUTED EARNINGS PER SHARE
Computation for Statement of Operations
Reconciliation of net income per statement of operations to amount
used in primary earnings per share computation:
Income before extraordinary items $ 1,232,018 $ 929,337 $ 4,385,185 $ 1,802,723
Add-Interest on short-term debt, net of tax effect, on application
of assumed proceeds from exercise of options and warrants in
excess of 20% limitation - - - -
Net income, as adjusted $ 1,232,018 $ 929,337 $ 4,185,185 $ 1,802,723
Additional Fully Diluted Computation
Net income, as adjusted per primary computation above $ 1,232,018 $ 929,337 $ 4,385,185 $ 1,802,723
Additional adjustment to weighted average number of
shares outstanding:
Weighted average number of shares outstanding 1,893,900 1,906,000 1,889,500 1,912,100
Add-Dilutive effect of outstanding options and warrants (as
determined by the application of the treasury
stock method) 811,700 277,000 785,500 276,900
Weighted average number of shares outstanding 2,705,600 2,183,000 2,675,000 2,189,000
Fully diluted earnings per share, as adjusted $ .46 $ .42 $ 1.64 $ .82
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> JUN-30-1996
<CASH> 4,224,835
<SECURITIES> 0
<RECEIVABLES> 3,088,775
<ALLOWANCES> 0
<INVENTORY> 118,674
<CURRENT-ASSETS> 7,809,505
<PP&E> 27,078,545
<DEPRECIATION> 14,735,052
<TOTAL-ASSETS> 42,272,194
<CURRENT-LIABILITIES> 911,401
<BONDS> 8,478,374
0
0
<COMMON> 20,463
<OTHER-SE> 30,494,956
<TOTAL-LIABILITY-AND-EQUITY> 42,272,194
<SALES> 2,524,663
<TOTAL-REVENUES> 13,449,936
<CGS> 1,134,098
<TOTAL-COSTS> 7,281,916
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 642,766
<INCOME-PRETAX> 6,175,185
<INCOME-TAX> 1,790,000
<INCOME-CONTINUING> 4,385,185
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,385,185
<EPS-PRIMARY> 1.72
<EPS-DILUTED> 1.64
</TABLE>
