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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, 1998
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, 1998, 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 Statements of Net Assets in
Liquidation as of June 30, 1998 and December 31, 1997
Unaudited Consolidated Statements of Changes in Net Assets
in Liquidation for the Three Months ended June 30, 1998 and
for the Six Months ended June 30, 1998
Unaudited Consolidated Statements of Operations (Going
Concern Basis) for the Three Months ended June 30, 1997
and for the Six Months ended June 30, 1997
Unaudited Consolidated Statement of Cash Flows (Going
Concern Basis) for the Six Months ended June 30, 1997
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 STATEMENTS OF NET ASSETS IN LIQUIDATION
(Dollars in thousands except per share amounts)
- --------------------------------------------------------------------------------
June 30, 1998 December 31, 1997
------------- -----------------
<S> <C> <C>
ASSETS
REAL ESTATE ASSETS ........................ $12,294 $17,121
CASH AND CASH EQUIVALENTS ................. 138 408
RESTRICTED CASH ........................... 500 1,500
------- -------
TOTAL ASSETS .......................... 12,932 19,029
------- -------
LIABILITIES
MORTGAGE NOTE PAYABLE ..................... 4,436 4,701
ESTIMATED COSTS OF LIQUIDATION ............ 300 470
ACCRUED MANAGEMENT DISTRIBUTION ........... 589 555
REDEEMABLE PREFERRED STOCK ................ 300 300
------- -------
TOTAL LIABILITIES ..................... 5,625 6,026
------- -------
COMMITMENTS AND CONTINGENCIES
NET ASSETS IN LIQUIDATION ...................... $ 7,307 $13,003
======= =======
NET ASSETS IN LIQUIDATION PER SHARE
(10,000,000 shares outstanding) .......... $ 0.73 $ 1.30
======= =======
</TABLE>
See notes to unaudited consolidated financial statements
<PAGE>
<TABLE>
<CAPTION>
RESURGENCE PROPERTIES INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS IN LIQUIDATION
(Dollars in thousands)
- --------------------------------------------------------------------------------
For the three months For the six months
Ended June 30, 1998 Ended June 30, 1998
------------------- -------------------
<S> <C> <C>
Net assets in liquidation, beginning of period .... $ 7,289 $ 13,003
Dividend Paid ..................................... -- (6,000)
Net changes in net assets in liquidation .......... 18 304
-------- --------
Net assets in liquidation, June 30, 1998 .......... $ 7,307 $ 7,307
======== ========
</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 three months For the six months
ended June 30, ended June 30,
1997 1997
-------------------- ------------------
<S> <C> <C>
REVENUES:
Minimum rents ............................. $1,846 $4,548
Recoveries from tenants ................... 240 819
Investment income ......................... 157 280
Net gain from asset dispositions .......... 251 3,547
Other ..................................... 156 236
------ ------
Total revenues ........................ 2,650 9,430
------ ------
EXPENSES:
Property operations ....................... 983 2,378
Interest expense .......................... 124 233
Non-income producing assets ............... 35 98
Management fees ........................... 369 817
General and administrative ................ 165 332
Depreciation and amortization ............. 335 734
------ ------
Total expenses ........................ 2,011 4,592
------ ------
INCOME BEFORE INCOME TAXES ..................... 639 4,838
Income Taxes .............................. -- --
------ ------
NET INCOME ..................................... $ 639 $4,838
====== ======
NET INCOME PER COMMON SHARE (10,000,000 shares
outstanding): ................................. $ 0.06 $ 0.48
====== ======
</TABLE>
See notes to unaudited consolidated financial statements
<PAGE>
<TABLE>
<CAPTION>
RESURGENCE PROPERTIES INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS (GOING CONCERN BASIS)
(Dollars in thousands)
- --------------------------------------------------------------------------------
For the Six Months
ended June 30,
1997
--------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income .................................................. $ 4,838
Adjustments to reconcile net income to net cash provided by
Operating activities:
Depreciation and amortization:
Operating real estate properties ................... 607
Other assets ....................................... 127
Net gain from asset dispositions ....................... (3,547)
Straight-line adjustment for stepped rentals ........... 109
Net changes in operating assets and liabilities ........ (448)
--------
Net cash provided by operating activities .......... 1,686
--------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net proceeds from sales of assets ...................... 34,555
Net collections on mortgage loans ...................... 299
Improvements to operating properties ................... (574)
--------
Net cash provided by investing activities .......... 34,280
--------
CASH FLOWS FROM FINANCING ACTIVITIES:
Common Stock Dividends ................................. (25,000)
Senior debt repayments, net ............................ (2,490)
Mortgage loan repayments ............................... (289)
Preferred stock dividends .............................. (14)
--------
Net cash used for financing activities ............. (27,793)
--------
NET INCREASE IN CASH AND CASH EQUIVALENTS ................... 8,173
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ............ 4,378
--------
CASH AND CASH EQUIVALENTS AT END OF PERIOD .................. $ 12,551
========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest ................................. $ 233
========
</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") has
been engaged in diversified real estate activities. 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 $300
have been recorded as of June 30, 1998 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, 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, 1997 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.
<PAGE>
B. RESTRICTED ASSETS
The Company believes that in addition to the costs and expenses
associated with facilitating the plan, it is necessary to set aside
cash or other assets as a Contingency Reserve of approximately $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 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
During the first quarter ended March 31, 1998, the Company sold the
Lawrenceville Industrial Campus and land assets for net proceeds of
approximately $4,606 and on July 23, 1998, the Company sold the Cross
Creek Business Center for net proceeds of approximately $12,025 of
which $4,410 was applied toward the full repayment of the mortgage loan
(Note E).
E. MORTGAGE NOTE PAYABLE
The mortgage note payable represents a 9.75% per annum fixed rate
non-recourse first mortgage note maturing on September 1, 1998 and
collateralized by the Cross Creek Business Center. This note was repaid
on July 23, 1998. (Note D)
F. MANAGEMENT AGREEMENT
The Management Agreement with Wexford was indefinitely extended during
1998 on a month to month basis subject to cancellation by either party
for any reason upon 30 days prior written notice. The Management Fee
for 1998 was $10 for the month of January and $22 per month from
February through July. The fee has been reduced to $11 per month for
the remainder of 1998.
G. ACCRUED MANAGEMENT DISTRIBUTION
Pursuant to the approved Plan of Liquidation, management distributions
are payable in the amount equal to ten percent of all 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).
Including the distribution to be paid on August 14, 1998 (Note H) total
distributions paid to date will be $8.95 per share. Management
distributions of $589 were accrued as of June 30, 1998.
<PAGE>
H. SUBSEQUENT EVENT
On July 27, 1998 the Board of Directors declared the fifth liquidating
dividend of $.65 per share to Common shareholders of record as of
August 6, 1998. This dividend will be paid on August 14, 1998. In
addition, the Board of Directors also authorized the Company to redeem
all of the outstanding Series I Preferred Stock (300,000 shares) on
August 14, 1998 at $1.00 per share plus all undeclared and unpaid
dividends thereon.
<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 six months ended June 30, 1998.
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 $300,000 have been recorded as of June 30, 1998 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 $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 substantially all of its portfolio. 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 first quarter ended March 31, 1998, the Company sold the
Lawrenceville Industrial Campus and land assets for net proceeds of
approximately $4,606,000. On July 23, 1998, the Company sold the Cross Creek
Business Center for net proceeds of approximately $12,025,000 of which
$4,410,000 was applied toward the full repayment of the mortgage loan.
<PAGE>
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.
The Company currently has one asset remaining which it is trying to
sell. Assuming the sale of such asset and satisfaction of its obligations, the
Company anticipates making a final liquidating distribution to shareholders in
January 1999.
On July 27, 1998, the Board of Directors declared the fifth liquidating
dividend of $.65 per share to common shareholders of record as of August 6, 1998
and approved the redemption of all of the Series I Preferred Stock (300,000
shares) at $1.00 per share plus all undeclared and unpaid dividends thereon.
This dividend and preferred stock redemption will be paid on August 14, 1998.
The source of funds for such dividend and redemption was from the cash generated
from the sale of the Cross Creek Business Center.
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits: None
(b) Reports on Form 8-K: None
<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 10, 1998 By: /s/ Joseph M. Jacobs
---------------------
Joseph M. Jacobs
Chief Executive Officer and President
(Duly Authorized Officer)
Date: August 10, 1998 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. 1998 FORM 10-Q
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 638,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 638,000
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 12,932,000
<CURRENT-LIABILITIES> 0
<BONDS> 4,436,000
300,000
0
<COMMON> 0
<OTHER-SE> 7,307,000
<TOTAL-LIABILITY-AND-EQUITY> 12,932,000
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
