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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 June 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 August 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
Consolidated Balance Sheets as of June 30, 1997
and December 31, 1996
Unaudited Consolidated Statements of Operations for the
Three Months Ended June 30, 1997 and 1996 and for the Six
Months ended June 30, 1997 and 1996
Unaudited Consolidated Statement of Shareholders'
Equity for the Six Months Ended June 30, 1997
Unaudited Consolidated Statements of Cash Flows for the
Six Months Ended June 30, 1997 and 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
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share and per share amounts)
June 30, December 31,
1997 1996
--------- ---------
<S> <C> <C>
ASSETS
OPERATING REAL ESTATE PROPERTIES:
Land ............................................... $ 7,385 $ 7,841
Buildings and improvements ......................... 30,636 32,557
--------- ---------
38,021 40,398
Accumulated depreciation and amortization .......... (3,256) (2,893)
--------- ---------
Operating real estate properties, net .......... 34,765 37,505
MORTGAGE LOANS ON REAL ESTATE:
Nonearning ......................................... -- 3,228
Allowance for possible losses ...................... -- (3,198)
--------- ---------
Mortgage loans on real estate, net ................. -- 30
CASH AND CASH EQUIVALENTS ............................... 12,551 4,378
ACCOUNTS RECEIVABLE (net of allowance
for doubtful accounts of $111 and $244) ............ 724 1,054
ASSETS HELD FOR SALE .................................... 21,215 49,387
OTHER ASSETS ............................................ 503 932
--------- ---------
TOTAL ASSETS ............................................ $ 69,758 $ 93,286
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Senior debt ........................................ $ -- $ 2,490
Mortgage notes payable ............................. 5,005 5,294
Real estate taxes .................................. 658 482
Other liabilities .................................. 571 1,320
--------- ---------
Total liabilities .............................. 6,234 9,586
COMMITMENTS AND CONTINGENCIES
REDEEMABLE PREFERRED STOCK .............................. 300 300
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RESURGENCE PROPERTIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share and per share amounts)
June 30, December 31,
1997 1996
--------- ---------
<S> <C> <C>
SHAREHOLDERS' EQUITY:
Common stock, par value $.01; 50,000,000 shares
Authorized; 10,000,000 shares issued and outstanding 100 100
Paid in capital .................................... 76,045 101,045
Accumulated deficit ................................ (12,921) (17,745)
--------- ---------
Total shareholders' equity .................... 63,224 83,400
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY .............. $ 69,758 $ 93,286
========= =========
See notes to unaudited consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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 six months
ended June 30, ended June 30,
-------------------- ------------------
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
REVENUES:
Minimum rents ......................... $ 1,846 $ 3,625 $ 4,548 $ 7,614
Recoveries from tenants ............... 240 606 819 1,452
Mortgage loan interest ................ -- 4,109 -- 4,554
Investment income ..................... 157 216 280 311
Net gain (loss) from asset dispositions 251 (12) 3,547 963
Other ................................. 156 82 236 168
------- ------- ------- -------
Total revenues .................... 2,650 8,626 9,430 15,062
------- ------- ------- -------
EXPENSES:
Property operations ................... 983 1,621 2,378 3,525
Interest expense ...................... 124 1,007 233 2,119
Non-income producing assets ........... 35 299 98 681
Management fees ....................... 369 513 817 1,025
General and administrative ............ 165 160 332 346
Depreciation and amortization ......... 335 776 734 1,553
Write-down for impairment of value .... -- -- -- 1,709
------- ------- ------- -------
Total expenses .................... 2,011 4,376 4,592 10,958
------- ------- ------- -------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RESURGENCE PROPERTIES INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except share and per share amounts)
(continued)
For the three months For the six months
ended June 30, ended June 30,
-------------------- ------------------
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
INCOME BEFORE INCOME TAXES AND
EXTRAORDINARY GAIN .................... 639 4,250 4,838 4,104
Income Taxes .......................... -- -- -- --
------- ------- ------- -------
INCOME BEFORE EXTRAORDINARY
GAIN .................................. 639 4,250 4,838 4,104
Extraordinary Gain .................... -- 46 -- 160
------- ------- ------- -------
NET INCOME ................................. $ 639 $ 4,296 $ 4,838 $ 4,264
======= ======= ======= =======
INCOME PER COMMON SHARE (10,000,000 shares
outstanding):
INCOME BEFORE EXTRAORDINARY GAIN ........... $ 0.06 $ 0.43 $ 0.48 $ 0.41
EXTRAORDINARY GAIN ......................... -- -- -- 0.02
------- ------- ------- -------
NET INCOME ................................. $ 0.06 $ 0.43 $ 0.48 $ 0.43
======= ======= ======= =======
See notes to unaudited consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RESURGENCE PROPERTIES INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
For the Six Months Ended June 30, 1997
(Dollars in thousands, except share amounts)
COMMON STOCK PAID IN ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT TOTAL
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1996 10,000,000 $ 100 $ 101,045 $ (17,745) $ 83,400
Common stock dividends ... -- -- (25,000) -- (25,000)
Preferred stock dividends -- -- -- (14) (14)
Net income ............... -- -- -- 4,838 4,838
---------- ---------- ---------- ---------- ----------
Balance, June 30, 1997 ... 10,000,000 $ 100 $ 76,045 $ (12,921) $ 63,224
========== ========== ========== ========== ==========
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 Six Months
ended June 30,
----------------------
1997 1996
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ................................................ $ 4,838 $ 4,264
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization:
Operating real estate properties ................. 607 1,392
Other assets ..................................... 127 161
Net gain from asset dispositions .......................... (3,547) (963)
Extraordinary gain ........................................ -- (160)
Write-down for impairment of value ........................ -- 1,709
Straight-line adjustment for stepped rentals .............. 109 26
Net changes in operating assets and liabilities ........... (448) (919)
-------- --------
Net cash provided by operating activities ............ 1,686 5,510
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net proceeds from sales of assets .................... 34,555 24,511
Net collections on mortgage loans .................... 299 14,050
Improvements to operating properties ................. (574) (1,199)
Acquisitions ......................................... -- (800)
-------- --------
Net cash provided by investing activities ........ 34,280 36,562
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Common stock dividends ............................... (25,000) --
Senior debt repayments, net .......................... (2,490) (11,420)
Mortgage loan repayments ............................. (289) (2,565)
Preferred stock dividends ............................ (14) (14)
Purchase of interest in senior debt .................. -- (7,912)
-------- --------
Net cash used for financing activities ........... (27,793) (21,911)
-------- --------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RESURGENCE PROPERTIES INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands) (continued)
For the Six Months
ended June 30,
----------------------
1997 1996
-------- --------
<S> <C> <C>
NET INCREASE IN CASH AND CASH EQUIVALENTS ................. 8,173 20,161
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD .......... 4,378 8,818
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ................ $ 12,551 $ 28,979
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest ............................... $ 233 $ 2,167
======== ========
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 (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").
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.
The interim financial information contained herein is unaudited;
however, in the opinion of management, all adjustments (consisting only
of normal recurring adjustments, other than write-downs for impairment
of value) 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.
Long-lived assets are not reclassified to assets held for sale until a
valid, binding sales contract is executed. No such reclassifications
were made for the three months ended June 30, 1997.
The results for the interim period are not necessarily indicative of
the results to be expected for the year ending December 31, 1997.
The Company has approximately $15.3 million of net operating loss
carry-forwards ("NOL") available for U.S. income tax purposes expiring
in years through 2011. 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.
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 128, "Earnings per Share" in February, 1997.
This pronouncement establishes standards for computing and presenting
earnings per share, and is effective for the Company's 1997 year-end
financial statements. The Company's management has determined that this
standard will have no impact on the Company's computation or
presentation of net income per common share.
B. ASSETS HELD FOR SALE
For the quarter ended June 30, 1997, the Company sold Ramser-Newton
Avenue, Executive Airport, Southridge Plaza, Greenway Village and
various land assets for net proceeds of approximately $1,400, $2,945,
$2,332, $2,295 and $162, respectively. These sales resulted in a net
gain of approximately $251, after deducting closing costs. The Company
expects that the sales contracts on substantially all of the remaining
assets held for sale will close by December 31, 1997.
<PAGE>
C. PLAN OF LIQUIDATION
On April 29, 1997, the Board of Directors approved a plan of complete
liquidation and dissolution of the Company (the "Plan") for submission
to shareholders for their approval at the annual shareholders meeting
which is expected to be held during the third quarter of 1997. The
effective date of the Plan will be upon the affirmative vote of a
majority of the Company's shareholders. Among 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.
D. 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
replacement of the Management Options is contingent upon shareholder
approval of the Plan. 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.
<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 June 30, 1997.
Plan of Liquidation
On April 29, 1997, the Board of Directors approved a plan of complete
liquidation and dissolution of the Company (the "Plan") for submission to its
shareholders for their approval at the annual shareholders meeting expected to
be held during the third quarter of 1997. The effective date of the Plan will be
upon the affirmative vote of a majority of the Company's shareholders. Among 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.
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.
Six Months Ended June 30, 1997 Compared To Six Months Ended June 30, 1996 and
Three Months Ended June 30, 1997 Compared To Three Months Ended June 30, 1996
For the six months ended June 30, 1997, revenues related to the
operations of the Company's operating properties decreased to $5,367,000 from
$9,066,000 for the same period in the prior year, primarily as a result of the
disposition of ten operating properties (two during the period from July 1996
through December 1996, four during the first quarter of 1997 and four during the
second quarter of 1997). For the same period, property operating expenses
correspondingly decreased to $2,378,000 from $3,525,000 in the prior year,
primarily as a result of the disposition of the ten properties. Depreciation and
amortization for the six months ended June 30, 1997 and 1996 amounted to
$734,000 and $1,553,000, respectively. The decrease in depreciation and
amortization is a result of the disposition of the ten operating properties as
mentioned above.
For the three months ended June 30, 1997, revenues related to the
operations of the Company's operating properties decreased to $2,086,000 from
$4,231,000 for the same period in the prior year, primarily as a result of the
disposition of the ten operating properties as noted above. For the same period,
property operating expenses correspondingly decreased to $983,000 from
$1,621,000 in the prior year, primarily as a result of the disposition of the
ten properties. Depreciation and amortization for the three months ended June
30, 1997 and 1996 amounted to $335,000 and $776,000, respectively. The decrease
in depreciation and amortization is a result of the disposition of the ten
operating properties as mentioned above.
<PAGE>
Mortgage loan interest decreased to zero for the six and three months
ended June 30, 1997 from $4,554,000 and $4,109,000 for the same periods in the
prior year, primarily as a result of the sale and/or repayment of all of the
mortgage loans. The results for the six and three months ended June 30, 1996
include approximately $3,864,000 of additional interest income from the payoff
of a pool of mortgage loans.
Investment income decreased to $280,000 and $157,000 for the six and
three months ended June 30, 1997 from $311,000 and $216,000 for the same periods
in the prior year, primarily due to a higher amount of cash available for
investment for the six and three months ended June 30, 1996.
Interest expense decreased to $233,000 and $124,000 for the six and
three months ended June 30, 1997 from $2,119,000 and $1,007,000 for the same
periods in the prior year, primarily due to the repayment of the entire
outstanding balance of the Senior Debt in January 1997.
Expenses related to non-income producing assets decreased to $98,000
and $35,000 for the six and three months ended June 30, 1997 from $681,000 and
$299,000 for the same periods in the prior year, primarily as a result of asset
sales.
General and administrative expenses, which primarily consist of
insurance, consulting, legal and accounting fees, remained relatively constant
for the six and three months ended June 30, 1997 as compared to the same periods
in the prior year.
In connection with the Company's purchases of interests in the Senior
Debt during the three months ended June 30, 1996, the Company recorded an
extraordinary gain of $46,000.
Capital Expenditures
Capital expenditures for the six months ended June 30, 1997 were
$574,000, of which approximately $300,000 related to tenant improvements. The
balance of the expenditures were for normal property improvements. The source of
funds for such capital expenditures was from cash generated from rents and
proceeds from the sale of assets.
Liquidity and Capital Resources
For the six months ended June 30, 1997, cash and cash equivalents
increased by $8,173,000. $1,686,000 was provided by operating activities,
$34,280,000 was provided by investing activities and $27,793,000 was used for
financing activities. Cash provided by investing activities consisted primarily
of net proceeds from asset sales of $34,555,000 and net collections on mortgage
loans of $299,000, partially offset by improvements to the operating properties
of $574,000. Cash used for financing activities consisted primarily of dividend
payments of $25,014,000, net Senior Debt repayments of $2,490,000 and mortgage
repayments of $289,000.
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.
<PAGE>
During the six months ended June 30, 1997, the Company sold eight
operating properties and various land assets for net proceeds of approximately
$34,555,000. These sales resulted in a net gain of approximately $3,279,000,
after deducting closing costs.
As of August 1, 1997, the Company has four assets under contract for
sale to various purchasers, which are expected to result in net proceeds of
approximately $23 million in the aggregate. All of the assets under contract are
subject to customary closing conditions and substantially all are expected to
close within the next three months.
<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 April 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: August 13, 1997 By: /s/ Joseph M. Jacobs
---------------------
Joseph M. Jacobs
Chief Executive Officer and President
(Duly Authorized Officer)
Date: August 13, 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
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 12,551,000
<SECURITIES> 0
<RECEIVABLES> 724,000
<ALLOWANCES> (111,000)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 69,758,000
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
300,000
<COMMON> 100,000
<OTHER-SE> 63,124,000
<TOTAL-LIABILITY-AND-EQUITY> 69,758,000
<SALES> 0
<TOTAL-REVENUES> 9,430,000
<CGS> 0
<TOTAL-COSTS> 2,378,000
<OTHER-EXPENSES> 1,981,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 233,000
<INCOME-PRETAX> 4,838,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 4,838,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,838,000
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
