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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, 1997
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, 1997, there were 10,000,000 shares of Common Stock, $0.01 par
value, outstanding.
<PAGE>
RESURGENCE PROPERTIES INC.
FORM 10-Q
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Unaudited Consolidated Statement of Net Assets in
Liquidation as of September 30, 1997
Consolidated Balance Sheet (Going Concern Basis) as of
December 31, 1996
Unaudited Consolidated Statement of Changes in Net Assets in
Liquidation for the Three Months ended September 30, 1997
Unaudited Consolidated Statements of Operations (Going
Concern Basis) for the Six Months Ended June 30, 1997 and
for the Three and Nine Months ended September 30, 1996
Unaudited Consolidated Statements of Cash Flows (Going
Concern Basis) for the Six Months Ended June 30, 1997 and
for the Nine Months ended September 30, 1996
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
UNAUDITED CONSOLIDATED STATEMENT OF NET ASSETS IN LIQUIDATION
(Dollars in thousands)
September 30, 1997
------------------
<S> <C>
ASSETS
REAL ESTATE ASSETS ........................................... $47,935
CASH AND CASH EQUIVALENTS .................................... 22,267
RESTRICTED CASH .............................................. 1,500
ACCOUNTS RECEIVABLE .......................................... 21
-------
TOTAL ASSETS ............................................. 71,723
-------
LIABILITIES
LIQUIDATING DISTRIBUTION PAYABLE ............................. 22,500
MORTGAGE NOTE PAYABLE ........................................ 4,855
ESTIMATED COSTS OF LIQUIDATION ............................... 954
ACCRUED MANAGEMENT DISTRIBUTION .............................. 561
REDEEMABLE PREFERRED STOCK ................................... 300
-------
TOTAL LIABILITIES ........................................ 29,170
-------
COMMITMENTS AND CONTINGENCIES
NET ASSETS IN LIQUIDATION ......................................... $42,553
=======
NET ASSETS IN LIQUIDATION IS COMPOSED OF:
AMOUNT DESIGNATED FOR DIVIDEND DECLARED OCTOBER 16, 1997 ..... $11,500
REMAINDER .................................................... 31,053
-------
NET ASSETS IN LIQUIDATION ......................................... $42,553
=======
</TABLE>
See notes to unaudited consolidated financial statements
<PAGE>
<TABLE>
<CAPTION>
RESURGENCE PROPERTIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (GOING CONCERN BASIS)
(Dollars in thousands, except per share amounts)
December 31, 1996
-----------------
<S> <C>
ASSETS
OPERATING REAL ESTATE PROPERTIES:
Land ..................................................... $ 7,841
Buildings and improvements ............................... 32,557
---------
40,398
Accumulated depreciation and amortization ................ (2,893)
---------
Operating real estate properties, net ................ 37,505
MORTGAGE LOANS ON REAL ESTATE:
Non-earning .............................................. 3,228
Allowance for possible losses ............................ (3,198)
---------
Mortgage loans on real estate, net ....................... 30
CASH AND CASH EQUIVALENTS ..................................... 4,378
ACCOUNTS RECEIVABLE (net of allowance
for doubtful accounts of $244) ........................... 1,054
ASSETS HELD FOR SALE .......................................... 49,387
OTHER ASSETS .................................................. 932
---------
TOTAL ASSETS .................................................. $ 93,286
=========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Senior debt .............................................. $ 2,490
Mortgage notes payable ................................... 5,294
Real estate taxes ........................................ 482
Other liabilities ........................................ 1,320
---------
Total liabilities .................................... 9,586
COMMITMENTS AND CONTINGENCIES
REDEEMABLE PREFERRED STOCK .................................... 300
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RESURGENCE PROPERTIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (GOING CONCERN BASIS)
(Dollars in thousands, except per share amounts)
(continued)
December 31, 1996
-----------------
<S> <C>
SHAREHOLDERS' EQUITY:
Common stock, par value $.01; 50,000,000 shares
Authorized; 10,000,000 shares issued and outstanding ..... 100
Paid-in-capital .......................................... 101,045
Accumulated deficit ...................................... (17,745)
---------
Total shareholders' equity .......................... 83,400
---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY .................... $ 93,286
=========
</TABLE>
See notes to unaudited consolidated financial statements
<PAGE>
<TABLE>
<CAPTION>
RESURGENCE PROPERTIES INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION
(Dollars in thousands)
For the three months
Ended September 30, 1997
------------------------
<S> <C>
Shareholders' equity, July 1, 1997 (going concern basis) ....... $ 63,224
Liquidation basis adjustments:
Adjust assets and liabilities to fair value ............... 3,490
Accrued estimated costs of liquidation .................... (1,100)
Accrued management distribution ........................... (561)
--------
Net assets in liquidation July 1, 1997 ......................... 65,053
Dividend Declared .............................................. (22,500)
Net changes in net assets in liquidation ....................... --
--------
Net assets in liquidation, September 30, 1997 .................. $ 42,553
========
</TABLE>
See notes to unaudited consolidated financial statements
<PAGE>
<TABLE>
<CAPTION>
RESURGENCE PROPERTIES INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS (GOING CONCERN BASIS) (Dollars
in thousands, except share and per share amounts)
For the six months For the three months For the nine months
ended June 30, ended September 30, ended September 30,
1997 1996 1996
---- ---- ----
<S> <C> <C> <C>
REVENUES:
Minimum rents ......................... $ 4,548 $ 3,432 $11,046
Recoveries from tenants ............... 819 704 2,156
Mortgage loan interest ................ -- 6 4,560
Investment income ..................... 280 361 672
Net gain (loss) from asset dispositions 3,547 (172) 791
Other ................................. 236 1,048 1,216
------- ------- -------
Total revenues .................... 9,430 5,379 20,441
------- ------- -------
EXPENSES:
Property operations ................... 2,378 1,818 5,343
Interest expense ...................... 233 702 2,821
Non-income producing assets ........... 98 240 921
Management fees ....................... 817 512 1,537
General and administrative ............ 332 124 470
Depreciation and amortization ......... 734 776 2,329
Write-downs for impairment of value ... -- 740 2,449
------- ------- -------
Total expenses .................... 4,592 4,912 15,870
------- ------- -------
INCOME BEFORE INCOME TAXES AND
EXTRAORDINARY GAIN .................... 4,838 467 4,571
Income Taxes .......................... -- -- --
------- ------- -------
INCOME BEFORE EXTRAORDINARY GAIN ........... 4,838 467 4,571
Extraordinary Gain .................... -- -- 160
------- ------- -------
NET INCOME ................................. $ 4,838 $ 467 $ 4,731
======= ======= =======
INCOME PER COMMON SHARE (10,000,000 shares
outstanding):
Income Before Extraordinary Gain ...... $ 0.48 $ 0.05 $ 0.46
Extraordinary Gain .................... -- -- 0.02
------- ------- -------
NET INCOME ................................. $ 0.48 $ 0.05 $ 0.48
======= ======= =======
</TABLE>
See notes to unaudited consolidated financial statements
<PAGE>
<TABLE>
<CAPTION>
RESURGENCE PROPERTIES INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS (GOING CONCERN BASIS)
(Dollars in thousands)
For the Six Months For the Nine Months
ended June 30, ended September 30,
1997 1996
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ....................................................... $ 4,838 $ 4,731
Adjustments to reconcile net income (loss) to net cash provided by
Operating activities:
Depreciation and amortization:
Operating real estate properties ........................ 607 1,999
Other assets ............................................ 127 330
Net gain from asset dispositions ............................ (3,547) (791)
Extraordinary gain .......................................... -- (160)
Write-down for impairment of value .......................... -- 2,449
Straight-line adjustment for stepped rentals ................ 109 37
Net changes in operating assets and liabilities ............. (448) (3,858)
-------- --------
Net cash provided by operating activities ................... 1,686 4,737
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net proceeds from sales of assets ........................... 34,555 25,934
Net collections on mortgage loans ........................... 299 14,050
Improvements to operating properties ........................ (574) (1,440)
Acquisitions ................................................ -- (800)
-------- --------
Net cash provided by investing activities ............... 34,280 37,744
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Common stock dividends ...................................... (25,000)
Senior debt repayments, net ................................. (2,490) (25,939)
Mortgage loan repayments .................................... (289) (2,701)
Preferred stock dividends ................................... (14) (21)
Purchase of interest in senior debt ......................... -- (7,920)
-------- --------
Net cash used for financing activities .................. (27,793) (36,581)
-------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS ........................ 8,173 5,900
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ................. 4,378 8,818
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ....................... $ 12,551 $ 14,718
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest ...................................... $ 233 $ 2,924
======== ========
</TABLE>
See notes to unaudited consolidated financial statements
<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 (the "Company") are
engaged in diversified real estate activities. 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").
On April 24, 1997, the Board of Directors approved a plan of complete
liquidation and dissolution of the Company (the "Plan") which was
approved by a majority vote of the shareholders on September 26, 1997.
The key features of the Plan are: (1) the cessation of all business
activities, other than those in furtherance of the Plan; (2) the sale
or disposition of all of the Company's assets; (3) the satisfaction of
all outstanding liabilities; (4) the payment of liquidating
distributions to shareholders in complete redemption of the Common
Stock; and (5) the authorization of the filing of Articles of
Dissolution. As a result of the adoption of the Plan, the Company
adopted the liquidation basis of accounting effective July 1, 1997,
whereby assets are valued at their estimated net realizable values and
liabilities are stated at their estimated settlement amounts. The
valuation of assets and liabilities requires many estimates and
assumptions by management and there are substantial uncertainties in
carrying out the provisions of the Plan. The amount and timing of any
liquidating distributions will depend upon a variety of factors
including, but not limited to, the actual proceeds from the sale of any
of the Company's assets, the ultimate settlement amounts of the
Company's liabilities and obligations, actual costs incurred in
connection with carrying out the Plan, including management fees and
administrative costs during the liquidation period, and the timing of
the liquidation and dissolution. Accruals totaling approximately $1,100
have been recorded as of July 1, 1997 for the estimated future costs of
liquidating the Company which include, but are not limited to, costs of
disposing of the Company's remaining assets and general and
administrative costs through the estimated conclusion of liquidation.
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, 1996 and Schedule 14A (Proxy
Statement) filed on August 25, 1997.
The interim financial information contained herein is unaudited;
however, in the opinion of management, all adjustments necessary for
the fair presentation of such financial information have been included.
The December 31, 1996 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, 1997.
<PAGE>
B. RESTRICTED CASH
The Company believes that in addition to the costs and expenses
associated with facilitating the plan, it is necessary to set aside a
Contingency Reserve of approximately $1,500. No liability has been
accrued for such contingencies. Following the payment, satisfaction or
other resolution of such contingencies, the Plan provides that any
amounts remaining in the Contingency Reserve shall be distributed to
the Company's stockholders.
C. REAL ESTATE ASSETS
Real estate assets have been recorded at the estimated net realizable
values in liquidation. No independent appraisals have been obtained on
these assets. The estimated net realizable values have been determined
based on actual sales subsequent to the balance sheet date, signed
contracts, contract negotiations, internal analysis, inquiries or
offers from prospective purchasers, inquiries of market professionals
and expected selling costs and operating results through the
anticipated disposal date.
D. ASSET SALES
For the quarter ended September 30, 1997, the Company sold Stuart Square
and Riverwood Plaza for net proceeds of approximately $7,164 and $3,645,
respectively.
E. LIQUIDATING DISTRIBUTION PAYABLE
On September 26, 1997 the Board of Directors declared the first
liquidating dividend of $2.25 per share to Common shareholders of
record as of October 7, 1997. This dividend was paid on October 16,
1997.
F. MORTGAGE NOTE PAYABLE
In August 1997, the Company and the holder of the $4,855 non-recourse
mortgage collateralized by the Cross Creek Business Center agreed to
extend the maturity date to September 1, 1998.
G. MANAGEMENT AGREEMENT
The Board of Directors and Wexford have agreed to an extension of the
management agreement with Wexford, which was due to expire on May 4,
1997, under a reduced fee arrangement through December 31, 1997 (the
"Extended Management Agreement") and to replace all of the Management
Options issued to Wexford with a compensation package designed to
provide the same economic benefits as the Management Options. The
Extended Management Agreement provides for a fee payable to Wexford of
$1,152,125 for the year ending December 31, 1997 subject to adjustment
based on actual expenses.
H. ACCRUED MANAGEMENT DISTRIBUTION
Pursuant to the approved plan of liquidation, the Management Options
were exchanged for Management Distributions. The Management
Distributions are payable in the amount equal to ten percent of all
<PAGE>
distributions made to stockholders of the Company in excess of $8.50
per share (inclusive of the $2.50 per share dividend paid on April 14,
1997).
I. SUBSEQUENT EVENTS
During October 1997 the Company sold Southern Plaza and Home Center
Village for net proceeds of approximately $4,390 and $8,173,
respectively. On October 16, 1997 the Board of Directors declared the
second in a series of liquidating dividends of $1.15 per share to
Common shareholders of record as of October 27, 1997 payable on
November 6, 1997.
<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, 1997.
Plan of Liquidation
On April 24, 1997, the Board of Directors approved a plan of complete
liquidation and dissolution of the Company (the "Plan") which was approved by a
majority vote of the shareholders on September 26, 1997. The key features of the
Plan are: (1) the cessation of all business activities, other than those in
furtherance of the Plan; (2) the sale or disposition of all of the Company's
assets; (3) the satisfaction of all outstanding liabilities; (4) the payment of
liquidating distributions to shareholders in complete redemption of the Common
Stock; and (5) the authorization of the filing of Articles of Dissolution. The
amount and timing of any liquidating distributions will depend upon a variety of
factors including, but not limited to, the actual proceeds from the sale of any
of the Company's assets, the ultimate settlement amounts of the Company's
liabilities and obligations, actual costs incurred in connection with carrying
out the Plan, including management fees and administrative costs during the
liquidation period, and the timing of the liquidation and dissolution. Accruals
totaling approximately $1,100,000 have been recorded as of July 1, 1997 for the
estimated future costs of liquidating the Company which include, but are not
limited to, costs of disposing of the Company's remaining assets and general and
administrative costs through the estimated conclusion of liquidation. The
Company believes that in addition to the costs and expenses associated with
facilitating the plan, it is necessary to set aside a Contingency Reserve in the
amount of approximately $1,500,000. No liability has been accrued for such
contingencies. Following the payment, satisfaction or other resolution of such
contingencies, the Plan provides that any amounts remaining in the Contingency
Reserve shall be distributed to the Company's stockholders.
Results of Operations - General
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, the timing of the liquidation of the Company 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.
During the quarter ended September 30, 1997 the Company sold Stuart
Square and Riverwood Plaza for net proceeds of approximately $7,164,000 and
$3,645,000, respectively, and during October 1997 the Company sold Southern
Plaza and Home Center Village for net proceeds of approximately $4,390,000 and
$8,173,000, respectively.
Liquidity and Capital Resources
The Company's primary objectives are to liquidate its assets in the
shortest time period possible while realizing the maximum values for such assets
and reduction of operating costs. Although the Company considers its assumptions
and estimates as to the values and timing of such liquidations to be reasonable,
the period of time to liquidate the assets and distribute the proceeds of such
assets is subject to significant business, economic and competitive
uncertainties and contingencies, many of which are beyond the Company's control.
<PAGE>
Cash available for distributions, defined as total cash and cash
equivalents less restricted cash, was approximately $22,267,000 at September 30,
1997, all of which was designated for the $2.25 per share dividend paid on
October 16, 1997. During October 1997, the Company received approximately
$12,563,000 in connection with the sale of two operating properties which will
be available to fund the $1.15 per share dividend to be paid on November 6,
1997.
On April 14, 1997 the Company paid a special dividend of $2.50 per
Common Share ($25,000,000) to shareholders of record as of March 28, 1997. The
source of funds for such dividend was from cash generated from rents and
proceeds from the sale of assets. On October 16, 1997 the Company paid the first
in a series of liquidating distributions of $2.25 per Common Share ($22,500,000)
to shareholders of record as of October 7, 1997 and on October 16, 1997 the
Board of Directors declared the second in a series of liquidating distributions
of $1.15 per share to shareholders of record as of October 27, 1997. This
dividend will be paid on November 6, 1997. After payment of this dividend total
distributions paid to shareholders in 1997 will be $5.90 per share and remaining
net assets in liquidation will be approximately $3.17 per share. Ten percent of
all distributions to shareholders in excess of $8.50 per share will be paid to
Management of the Company.
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits: None
(b) Reports on Form 8-K: the Company filed a report on
Form 8-K dated September 30, 1997.
<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 6, 1997 By: /s/ Joseph M. Jacobs
---------------------
Joseph M. Jacobs
Chief Executive Officer and President
(Duly Authorized Officer)
Date: November 6, 1997 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>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS CONTAINED IN ITEM 8 TO THE RESURGENCE PROPERTIES INC. 1997 FORM 10-Q
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 23,767,000
<SECURITIES> 0
<RECEIVABLES> 21,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 23,788,000
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 71,723,000
<CURRENT-LIABILITIES> 22,500,000
<BONDS> 4,855,000
300,000
0
<COMMON> 42,553,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 71,723,000
<SALES> 0
<TOTAL-REVENUES> 3,490,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,661,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,829,000
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
