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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
Commission file number: 0-24740
RESURGENCE PROPERTIES INC.
(Exact name of registrant as specified in its charter)
MARYLAND 13-3757163
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
c/o Wexford Management LLC
411 West Putnam Avenue, Greenwich, CT 06830
(Address of principal executive offices)
(203) 862-7000
(Registrant's telephone number, including area code)
None
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [ X ] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
As of November 1, 1996, there were 10,000,000 shares of Common Stock, $0.01 par
value, outstanding.
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<PAGE>
RESURGENCE PROPERTIES INC.
FORM 10-Q
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of September 30, 1996 and
December 31, 1995
Unaudited Consolidated Statements of Operations for the
Three Months Ended September 30, 1996 and 1995 and for
the Nine Months Ended September 30, 1996 and 1995
Unaudited Consolidated Statement of Shareholders' Equity
for the Nine Months Ended September 30, 1996
Unaudited Consolidated Statements of Cash Flows for the
Nine Months Ended September 30, 1996 and 1995
Notes to Unaudited Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
<PAGE>
<TABLE>
<CAPTION>
RESURGENCE PROPERTIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share and per share amounts)
September 30, December 31,
1996 1995
--------- ---------
<S> <C> <C>
ASSETS
OPERATING REAL ESTATE PROPERTIES:
Land ..................................................................... $ 15,834 $ 20,539
Buildings and improvements ............................................... 60,854 78,868
--------- ---------
76,688 99,407
Accumulated depreciation and amortization ................................ (4,878) (4,337)
--------- ---------
Operating real estate properties, net ........................... 71,810 95,070
MORTGAGE LOANS ON REAL ESTATE:
Earning .................................................................. -- 15,052
Non-earning .............................................................. 5,640 7,162
--------- ---------
5,640 22,214
Allowance for possible losses ............................................ (3,810) (5,295)
--------- ---------
Mortgage loans on real estate, net ....................................... 1,830 16,919
CASH AND CASH EQUIVALENTS ...................................................... 14,718 8,818
ACCOUNTS RECEIVABLE (net of allowance
for doubtful accounts of $241 and $196) .................................. 1,235 1,802
ASSETS HELD FOR SALE ........................................................... 24,225 31,707
OTHER ASSETS ................................................................... 4,643 1,547
--------- ---------
TOTAL ASSETS ................................................................... $ 118,461 $ 155,863
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Senior debt .............................................................. $ 23,883 $ 57,898
Mortgage notes payable ................................................... 5,433 8,134
Real estate taxes ........................................................ 1,208 5,476
Other liabilities ........................................................ 1,226 2,354
--------- ---------
Total liabilities ............................................... 31,750 73,862
COMMITMENTS AND CONTINGENCIES
REDEEMABLE PREFERRED STOCK ..................................................... 300 300
<PAGE>
<CAPTION>
RESURGENCE PROPERTIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share and per share amounts)
(continued)
September 30, December 31,
1996 1995
--------- ---------
SHAREHOLDERS' EQUITY:
Common stock, par value $.01; 50,000,000 shares
authorized; 10,000,000 shares issued and outstanding ................ 100 100
Paid-in-capital .......................................................... 101,045 101,045
Accumulated deficit ...................................................... (14,734) (19,444)
--------- ---------
Total shareholders' equity ..................................... 86,411 81,701
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ..................................... $ 118,461 $ 155,863
========= =========
See notes to unaudited consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
RESURGENCE PROPERTIES INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except share and per share amounts)
For the three months For the nine months
ended September 30, ended September 30,
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
REVENUES:
Minimum rents ..................................... $ 3,432 $ 4,271 $ 11,046 $ 12,658
Recoveries from tenants ........................... 704 763 2,156 2,605
Mortgage loan interest ............................ 6 503 4,560 1,687
Investment income ................................. 361 139 672 523
Net gain (loss) from asset dispositions ........... (172) 32 791 90
Other ............................................. 1,048 149 1,216 320
-------- -------- -------- --------
Total revenues ........................... 5,379 5,857 20,441 17,883
-------- -------- -------- --------
EXPENSES:
Property operations ............................... 1,818 2,170 5,343 6,304
Interest expense .................................. 702 1,571 2,821 5,017
Non-income producing assets ....................... 240 509 921 1,446
Management fees ................................... 512 512 1,537 1,537
General and administrative ........................ 124 322 470 768
Depreciation and amortization ..................... 776 882 2,329 2,545
Write-downs for impairment of value ............... 740 1,020 2,449 4,020
-------- -------- -------- --------
Total expenses ........................... 4,912 6,986 15,870 21,637
-------- -------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES AND
EXTRAORDINARY GAIN ............................... 467 (1,129) 4,571 (3,754)
Income Taxes ...................................... -- -- -- --
-------- -------- -------- --------
INCOME (LOSS) BEFORE EXTRAORDINARY GAIN ................. 467 (1,129) 4,571 (3,754)
Extraordinary Gain ................................ -- 171 160 760
-------- -------- -------- --------
NET INCOME (LOSS) ....................................... $ 467 $ (958) $ 4,731 $ (2,994)
======== ======== ======== ========
INCOME (LOSS) PER COMMON SHARE
(10,000,000 shares outstanding):
INCOME (LOSS) BEFORE EXTRAORDINARY GAIN ................. $ 0.05 $ (0.11) $ 0.46 $ (0.38)
EXTRAORDINARY GAIN ...................................... -- 0.02 0.02 0.08
-------- -------- -------- --------
NET INCOME (LOSS) ....................................... $ 0.05 $ (0.09) $ 0.48 $ (0.30)
======== ======== ======== ========
See notes to unaudited consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RESURGENCE PROPERTIES INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
For the Nine Months Ended September 30, 1996
(Dollars in thousands, except share amounts)
COMMON STOCK PAID - IN ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT TOTAL
------ ------ ------- ------- -----
<S> <C> <C>
Balance, December 31, 1995 ............. 10,000,000 $ 100 $ 101,045 $ (19,444) $ 81,701
Preferred stock dividends .............. -- -- -- (21) (21)
Net income ............................. -- -- -- 4,731 4,731
---------- ---------- ---------- ---------- ----------
Balance, September 30, 1996 ............ 10,000,000 $ 100 $ 101,045 $ (14,734) $ 86,411
========== ========== ========== ========== ==========
See notes to unaudited consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RESURGENCE PROPERTIES INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
For the Nine Months
ended September 30,
----------------------
1996 1995
-------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ................................................ $ 4,731 $ (2,994)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation and amortization:
Operating real estate properties ........................ 1,999 2,445
Other assets ............................................ 330 100
Net gain from asset dispositions ............................ (791) (90)
Extraordinary gain .......................................... (160) (760)
Write-downs for impairment of value ......................... 2,449 4,020
Straight line adjustment for stepped rentals ................ 37 (9)
Net changes in assets and liabilities ....................... (3,858) (2,089)
-------- --------
Net cash provided by operating activities ............... 4,737 623
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net proceeds from sales of assets ........................... 25,934 6,982
Net collections on mortgage loans ........................... 14,050 2,717
Improvements to operating properties ........................ (1,440) (1,433)
Property acquisitions ....................................... (800) (9,532)
-------- --------
Net cash provided by (used for) investing activities .... 37,744 (1,266)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Senior debt repayments, net ................................. (25,939) (4,394)
Mortgage loan repayments .................................... (2,701) (70)
Preferred stock dividends ................................... (21) (21)
Purchase of interest in senior debt ......................... (7,920) (10,059)
-------- --------
Net cash used for financing activities .................. (36,581) (14,544)
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ............. 5,900 (15,187)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ................. 8,818 26,877
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ....................... $ 14,718 $ 11,690
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest ...................................... $ 2,924 $ 6,113
======== ========
See notes to unaudited consolidated financial statements
</TABLE>
<PAGE>
RESURGENCE PROPERTIES INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
A. ORGANIZATION AND ACCOUNTING POLICIES
Resurgence Properties Inc. and its subsidiaries and sub-partnership
(the "Company") is engaged in diversified real estate activities,
including the ownership, operation and management of retail, office,
industrial/warehouse and multi-family real estate, and investments in
mortgage loans on real estate. The Company was incorporated on March
25, 1994 and began its operations on April 7, 1994, when the Company
succeeded to most of the assets of Liberte Investors ("Liberte") upon
consummation of Liberte's bankruptcy plan ("The Plan of
Reorganization"). The Company is managed and administered by Wexford
Management LLC ("Wexford").
The accompanying financial statements, notes and discussions should be
read in conjunction with the consolidated financial statements, related
notes and discussions contained in the Company's annual report on Form
10-K for the year ended December 31, 1995, which is herein incorporated
by reference. Consequently, information with respect to the
organization, significant accounting policies and other required
disclosures are contained therein.
The interim financial information contained herein is unaudited;
however, in the opinion of management, all adjustments (consisting only
of normal recurring adjustments) necessary for the fair presentation of
such financial information have been included.
The December 31, 1995 year-end balance sheet data presented herein was
derived from audited financial statements, but does not include all
disclosures required by generally accepted accounting principles.
The results for the interim period are not necessarily indicative of
the results to be expected for the year ending December 31, 1996.
The Company has approximately $9.4 million of net operating loss
carry-forwards ("NOL") available for U.S. income tax purposes expiring
in years through 2008. The Company has provided a valuation allowance
to offset the full amount of the net deferred tax assets arising from
book and tax differences including those from the NOL's.
Certain reclassifications have been made to the prior year financial
statements to conform with the current period presentation.
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121,"Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of" ("SFAS No. 121"). The Company
adopted SFAS No. 121 for the fiscal year beginning January 1, 1996.
<PAGE>
Under SFAS No. 121 the initial test to determine if impairment exists
is to compute the recoverability of the asset based on anticipated cash
flows (net realizable value) compared to the net carrying value of the
asset. If anticipated cash flows on an undiscounted basis are
insufficient to recover the net carrying value of the asset, an
impairment loss should be recognized, and the asset written down to its
estimated fair value. The fair value of the asset is the amount by
which the asset could be bought or sold in a current transaction
between willing parties, that is, other than in a forced or liquidation
sale. The net realizable value of an asset will generally be greater
than its fair value because net realizable value does not discount cash
flows to present value and discounting is usually one of the
assumptions used in determining fair value.
Upon implementation of SFAS No. 121, certain of the Company's assets
held for sale have been written down to their estimated fair values,
while others remain at depreciated cost. Thus, the net carrying value
of the Company's asset portfolio may differ materially from its fair
value. However, the write-downs for impairment do not affect the tax
basis of the assets and the write-downs are not included in the
determination of taxable income or loss.
Because the determination of both net realizable value and fair value
is based upon projections of future economic events such as property
occupancy rates, rental rates, operating cost inflation and market
capitalization rates which are inherently subjective, the amounts
ultimately realized at disposition may differ materially from the net
carrying value as of the balance sheet date. The cash flows used to
determine fair value and net realizable value are based on good faith
estimates and assumptions developed by management. Inevitably,
unanticipated events and circumstances may occur and some assumptions
may not materialize; therefore actual results may vary from our
estimates and the variances may be material. The Company may provide
additional losses in subsequent periods if the real estate market or
local economic conditions change and such write-downs could be
material.
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting
for Stock-Based Compensation," which was effective for the Company
beginning January 1, 1996. SFAS No. 123 requires expanded disclosures
of stock based compensation arrangements with employees and encourages
(but does not require) compensation cost to be measured based on the
fair value of the equity instrument awarded. Companies are permitted,
however, to continue to apply APB Opinion No. 25, which recognizes
compensation cost based on the intrinsic value of the equity instrument
awarded. The Company will continue to apply APB Opinion No. 25 to its
stock based compensation awards to employees and will disclose the
required pro forma effect on net income and earnings per share. As of
September 30, 1996 there was no effect on net income or earnings per
share arising from stock based compensation.
<PAGE>
B. ASSETS HELD FOR SALE
Harbor Bay Business Park, located in Alameda, California, is a 50,000
square foot office building, built in 1989 and is situated on 2.75
acres of land. The net carrying value as of September 30, 1996 was
$1,913. During the third quarter of 1996, the Company entered into a
contract to sell the property for $2,250. Accordingly, the property was
reclassified on the consolidated balance sheet from an operating
property to an asset held for sale as of September 30, 1996. The
property was subsequently sold in November 1996 for $2,146, net of
closing costs.
During the third quarter of 1996, the Company received $917 from a
settlement of a lawsuit the Company instituted against a former tenant
for default of their lease obligation.
During the third quarter of 1996, the Company sold various land assets
for net proceeds of approximately $1,298, which resulted in a loss of
$172.
In October 1996, the Company sold Cimarron Plaza for net proceeds of
$7,912, which resulted in a loss of $39.
C. SENIOR DEBT
The Company prepaid $11,376 and $3,143 in July 1996 and September 1996,
respectively, of its Senior Debt then outstanding. In November 1996,
the Company prepaid an additional $7,958 of its Senior Debt then
outstanding. The net principal balance outstanding after the November
1996 prepayment was approximately $15,924.
D. WRITE-DOWNS FOR IMPAIRMENT OF VALUE AND LOAN LOSSES
During the third quarter of 1996 and 1995, the Company recorded
write-downs for impairment of value on certain assets totaling $740 and
$1,020, respectively. No independent appraisal of these assets has been
obtained or is contemplated. Since the determination of fair value is
based on future economic events which are inherently subjective, the
amounts ultimately realized may differ materially from the carrying
values as of the balance sheet date.
A discussion of the specific circumstances regarding the write-downs
recorded in the third quarter of 1996 is as follows (this discussion
excludes changes in net carrying values resulting from capital
improvements, sales, pay downs or depreciation):
Bayshore Club Apartments, located in Naples, Florida, is a two story,
200 unit apartment complex comprising 165,600 square feet in 16
buildings that was constructed in 1976 and renovated in 1991 and is
situated on 32.27 acres of land. The net carrying value of the property
was $5,640 as of December 31, 1995. In March 1996, the Company entered
into a contract for sale of the property for $5,350. Due to a
subsequent decline in the standard of living in the neighborhood,
increases in the number of available garden apartment units in the
marketplace and the inability to reverse the decline in occupancy at
the property, it was necessary to negotiate an amendment to the
contract reducing the sale price to $4,400, including estimated closing
<PAGE>
costs. Accordingly, the property was reclassified on the consolidated
balance sheet from an operating property to an asset held for sale as
of March 31, 1996 and a write-down of $1,197 was recorded during the
first quarter of 1996. Subsequently, the amended contract fell through
and the Company entered into a new contract with a different purchaser
for $3,800, including closing costs. Accordingly, a write-down of $620
was recorded during the third quarter of 1996 to reduce the net
carrying value to $3,800.
P&V Enterprises, located in Palmdale, California, consists of 59 vacant
lots zoned for single family homes. During the third quarter of 1996,
the Company entered into an option contract with a prospective buyer,
for a total sales price of $400, including estimated closing costs.
Accordingly, a write-down of $120 was recorded in the third quarter of
1996 to reduce the net carrying value to $400.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following section includes a discussion and analysis of the results of the
Company for the quarter ended September 30, 1996.
Results of Operations - General
The Company's current objective is to maximize shareholder value
through (i) actively managing its real estate and mortgage portfolio to optimize
both cash flow and capital appreciation, (ii) selectively disposing of certain
assets and (iii) acquiring interests in real property and mortgages offering
superior profit potential. The Company believes that the market price of the
Common Stock is trading at prices below the market value of the Company's assets
net of its liabilities. Accordingly, the Company has undertaken an analysis of
its operating and financial activities to consider alternative strategies that,
consistent with the objective of maximizing long-term shareholder value, will
increase the market price of the Common Stock. Strategies that the Company may
pursue would include, but would not be limited to, changes in the composition of
the Company's asset portfolio, business combinations, the disposition of
significant portions of the Company's assets, the sale of the Company or the
liquidation of the Company.
The Company has disposed of a significant portion of its portfolio
acquired under the plan of reorganization of Liberte Investors. The future
performance of the Company's portfolio of assets will be subject to prevailing
economic conditions and to financial, business and other factors, including the
future performance of the real estate market, the availability of financing to
prospective asset purchasers and to other factors beyond the Company's control.
For these reasons, the results of the Company's operations from period to period
may not be comparable.
Inflation is not expected to have a material impact on the Company's
results of operations or financial position.
Nine Months Ended September 30, 1996 Compared to the Nine Months Ended September
30, 1995 and Three Months Ended September 30, 1996 Compared to the Three Months
Ended September 30, 1995
For the nine months ended September 30, 1996, revenues related to the
operations of the Company's operating properties decreased to $13,202,000 from
$15,263,000 for the same period in the prior year, primarily as a result of the
disposition of six operating properties (one each in September 1995, January
1996, February 1996, March 1996, April 1996 and June 1996) partially offset by
the acquisition of an operating property in February 1995. For the same period,
property operating expenses decreased to $5,343,000 from $6,304,000 in the prior
year, primarily as a result of the six dispositions and partially offset by the
acquisition of one property, as mentioned above. Exclusive of revenues and
expenses related to the six properties sold and one acquired, operating revenue
and expenses for the nine months ended September 30, 1996 were $10,655,000 and
$3,959,000, respectively, compared to $10,730,000 and $3,935,000, respectively,
for the same period in the prior year. Depreciation and amortization for the
nine months ended September 30, 1996 and 1995, amounted to $2,329,000 and
$2,545,000, respectively. The decrease in depreciation and amortization is a
result of the disposition of the six operating properties as mentioned above and
write-downs of operating properties in the latter part of 1995.
<PAGE>
For the three months ended September 30, 1996, revenues related to the
operations of the Company's operating properties decreased to $4,136,000 from
$5,034,000 for the same period in the prior year, primarily as a result of the
disposition of six operating properties as discussed above. For the same period,
property operating expenses decreased to $1,818,000 from $2,170,000 in the prior
year, primarily as a result of the disposition of six operating properties as
discussed above. Exclusive of revenues and expenses related to the six
properties sold, operating revenue and expenses for the three months ended
September 30, 1996 were $3,546,000 and $1,466,000, respectively, compared to
$3,504,000 and $1,379,000, respectively, for the same period in the prior year.
Depreciation and amortization for the three months ended September 30, 1996 and
1995, amounted to $776,000 and $882,000, respectively. The decrease in
depreciation and amortization is a result of the disposition of the six
operating properties as mentioned above and write-downs of operating properties
in the latter part of 1995.
Mortgage loan interest, primarily generated from earning loans
increased to $4,560,000 for the nine months ended September 30, 1996 from
$1,687,000 for the same period in the prior year. For the three months ended
September 30, 1996, mortgage loan interest decreased to $6,000 from $503,000 for
the same period in the prior year. The increase for the nine months ended
September 30, 1996 is primarily due to the payoff of the pool of first mortgage
loans collateralized by eight industrial buildings located in New Jersey (the
"JPC Mortgages") during the second quarter of 1996, which resulted in the
recognition of contingent interest income of $3,864,000. This increase was
slightly offset by the reduction in mortgage loan interest as a result of
mortgage loan payoffs during the latter part of 1995 and the sale of a mortgage
loan in January 1996. The decrease for the three months ended September 30, 1996
compared to the prior year is a result of mortgage loan payoffs during the
latter part of 1995 and the sale of a mortgage loan in January 1996.
Other income increased to $1,216,000 for the nine months ended
September 30, 1996 from $320,000 for the same period in the prior year and to
$1,048,000 for the three months ended September 30, 1996 from $149,000 for the
same period in the prior year, primarily due to a $917,000 settlement received
in September 1996 from a lawsuit the Company instituted against a former tenant
for default of their lease obligation.
Investment income increased to $672,000 for the nine months ended
September 30, 1996 from $523,000 for the same period in the prior year and to
$361,000 for the three months ended September 30, 1996 from $139,000 for the
same period in the prior year, primarily due to a larger amount of cash
available for investment during the first nine months of 1996 as compared to the
same period in 1995.
Interest expense decreased to $2,821,000 for the nine months ended
September 30, 1996 from $5,017,000 for the same period in the prior year and to
$702,000 for the three months ended September 30, 1996 from $1,571,000 for the
same period in the prior year, primarily due to the reduction in the outstanding
balance of the Senior Debt resulting from the purchases, prepayments and
quarterly amortization payments and the payoff of the Barrington Hills mortgage
in January 1996.
<PAGE>
Expenses related to non-income producing assets decreased to $921,000
for the nine months ended September 30, 1996 from $1,446,000 for the same period
in the prior year and to $240,000 for the three months ended September 30, 1996
from $509,000 for the same period in the prior year, primarily as a result of
asset sales. Expenses related to non-income producing assets consisted primarily
of real estate taxes. Such expenses will decrease in the future to the extent
that such assets are sold. However, to the extent the Company forecloses on the
remaining mortgage loans, expenses related to assets held for sale may increase.
General and administrative expenses, which primarily consists of
insurance, consulting, legal and accounting fees, decreased to $470,000 for the
nine months ended September 30, 1996 from $768,000 for the same period in the
prior year and decreased to $124,000 for the three months ended September 30,
1996 from $322,000 for the same period in the prior year primarily due to a
decrease in legal and consulting fees.
In March 1995, the Financial Accounting Standards Board issued
Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed of ("SFAS No. 121"). The Company adopted SFAS
No. 121 for the fiscal year beginning January 1, 1996. See Note A to the
consolidated financial statements.
In accordance with SFAS No. 121, the Company monitors the value of its
assets on a continuous basis to ascertain if impairment exists, based on current
information available to the Company. For the nine months and three months ended
September 30, 1996, the Company recorded write-downs for impairment of value on
certain assets held for sale of $2,449,000 and $740,000, respectively. For the
nine months ended September 30,1995, the company recorded wide-downs for
impairment of value on mortgage loans of $453,000, on operating properties of
$573,000 and certain assets held for sale of $2,994,000, totaling $4,020,000 and
for the three months ended September 30, 1995, the Company recorded write-downs
for impairment of value on mortgage loans of $453,000 and certain assets held
for sale of $567,000, totaling $1,020,000.
In connection with the Company's purchases of interests in the Senior
Debt, as discussed below, for the nine months ended September 30, 1996 and 1995,
the Company recorded extraordinary gains of $160,000 and $760,000, respectively,
and for the three months ended September 30, 1995, the Company recorded
extraordinary gains of $171,000. No extraordinary gain was recorded for the
three months ended September 30, 1996.
Capital Expenditures
Capital expenditures for the nine months ended September 30, 1996 were
$1,440,000 of which approximately $976,000 related to tenant improvements,
$311,000 related to structural repairs at 1025 Vermont Avenue and the balance
was for normal property improvements. The source of funds for such capital
expenditures were from cash generated from rents, interest received on mortgage
loans, proceeds from the sale of assets and principal repayments on its mortgage
loans.
<PAGE>
Liquidity and Capital Resources
For the nine months ended September 30, 1996, cash and cash equivalents
increased by $5,900,000. $4,737,000 was provided by operating activities,
$37,744,000 was provided by investing activities and $36,581,000 was used for
financing activities. Cash provided by investing activities consisted primarily
of net proceeds from asset sales of $25,934,000 and net collections on mortgage
loans of $14,050,000 partially offset by improvements to the operating
properties of $1,440,000 and the purchase of a building for $800,000. Cash used
for financing activities consisted primarily of net Senior Debt repayments of
$25,939,000, mortgage repayments of $2,701,000 and purchases of interests in the
Senior Debt of $7,920,000.
During the nine months ended September 30, 1996, the Company sold
Barrington Hills, Copper Creek Apartments, Olympia Corners, Pike Plaza, Shoppes
at Cloverplace and the Fort Smith Quarry mortgage loan and various land assets
for net proceeds of approximately $25,934,000. These sales resulted in a net
gain of $791,000, after deducting closing costs.
In connection with Liberte's Plan of Reorganization, the Company
assumed Liberte's then outstanding debt under Liberte's credit agreements which
was restructured pursuant to the Credit Agreement, the Company's sole credit
facility. The Credit Agreement has no provision for the extension of additional
credit and the Company, at present, believes that available cash, existing cash
flow from operations and the proceeds from sales of properties and mortgage
repayments are sufficient to satisfy the Company's foreseeable cash requirements
(principally scheduled debt maturities and amortization, capital expenditures
and other assumed liabilities inclusive of real estate taxes) and, when combined
with the Company's ability to leverage new investments, should be sufficient to
finance such new investments.
As of September 30, 1996, the Senior Debt under the Credit Agreement
was approximately $23,883,000. This is net of $11,229,000 which the Company has
acquired through September 30, 1996. In November 1996, the Company prepaid
$7,958,000 of it's Senior Debt then outstanding. The net principal balance
outstanding after such prepayment was approximately $15,924,000. The source of
funds for such prepayment was from cash generated from rents, interest received
on mortgage loans, proceeds from the sale of assets and principal repayments on
its mortgage loans.
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K:
(a) Not applicable.
(b) None. The Company was not required to file any reports
on Form 8-K during the quarter ended September 30,
1996.
<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.
Resurgence Properties Inc.
Date: November 14, 1996 By: /s/ Joseph M. Jacobs
---------------------
Joseph M. Jacobs
Chief Executive Officer and President
(Duly Authorized Officer)
Date: November 14, 1996 By: /s/ Jay L. Maymudes
--------------------
Jay L. Maymudes
Chief Financial Officer, Vice President
and Secretary (Principal Financial and
Accounting Officer and Duly Authorized
Officer)
<TABLE> <S> <C>
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<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 14,718,000
<SECURITIES> 0
<RECEIVABLES> 1,476,000
<ALLOWANCES> (241,000)
<INVENTORY> 0
<CURRENT-ASSETS> 0
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<DEPRECIATION> 0
<TOTAL-ASSETS> 118,461,000
<CURRENT-LIABILITIES> 0
<BONDS> 29,316,000
0
300,000
<COMMON> 100,000
<OTHER-SE> 86,011,000
<TOTAL-LIABILITY-AND-EQUITY> 118,461,000
<SALES> 0
<TOTAL-REVENUES> 20,441,000
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<OTHER-EXPENSES> 7,706,000
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<EXTRAORDINARY> 160,000
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