Transcontinental Realty Investors (TCI) 8-K Results of Operations and Financial Condition

TRANSCONTINENTAL REALTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
	For the Three Months Ended						For the Six Months Ended
	June 30,						June 30,
	2013			2012			2013			2012
	(dollars in thousands, except share and per share amounts)
Revenues:
Rental and other property revenues (including $166 and $167 for the three months and $331 and $335 for the six months ended 2013 and 2012 respectively from related parties)	$	26,340		$	26,421		$	52,285		$	52,221
Expenses:
Property operating expenses  (including $185 and $236 for the three months and $405 and $500 for the six months ended 2013 and 2012 respectively from related parties)		11,915			12,717			24,354			24,932
Depreciation and amortization		5,412			4,947			10,250			9,930
General and administrative  (including $839 and $682 for the three months and $1,544 and $1,345 for the six months ended 2013 and 2012 respectively from related parties)		1,616			771			3,441			3,213
Provision on impairment of notes receivable and real estate assets		-			-			-			-
Advisory fee to related party		2,071			2,217			4,209			4,521
Total operating expenses		21,014			20,652			42,254			42,596
Operating income		5,326			5,769			10,031			9,625
Other income (expense):
Interest income  (including $2,149 and $3,866 for the three months and $4,140 and $7,091 for the six months ended 2013 and 2012 respectively from related parties)		2,119			3,869			4,296			7,098
Other income  (including $0 and $1,500 for the three months and $0 and $3,000 for the six months ended 2013 and 2012 respectively from related parties)		144			1,592			180			3,312
Mortgage and loan interest  (including $439 and $1,107 for the three months and $487 and $1,861 for the six months ended 2013 and 2012 respectively from related parties)		(9,654	)		(11,207	)		(19,246	)		(22,398	)
Deferred borrowing costs amortization		(946	)		(1,957	)		(3,378	)		(2,852	)
Loan charges and prepayment penalties		(3,226	)		(3,769	)		(7,209	)		(6,162	)
Loss on the sale of investments		-			(16	)		-			(118	)
Earnings from unconsolidated joint ventures and investees		15			9			22			(63	)
Total other expenses		(11,548	)		(11,479	)		(25,335	)		(21,183	)
Loss before gain on land sales, non-controlling interest, and taxes		(6,222	)		(5,710	)		(15,304	)		(11,558	)
Gain (loss) on land sales		-			4,738			(48	)		5,160
Loss from continuing operations before tax		(6,222	)		(972	)		(15,352	)		(6,398	)
Income tax benefit		6,427			1,200			8,574			1,654
Net income (loss) from continuing operations		205			228			(6,778	)		(4,744	)
Discontinued operations:
Income (loss) from discontinued operations		290			1,927			231			(364	)
Gain on sale of real estate from discontinued operations		18,074			1,502			24,265			5,091
Income tax expense from discontinued operations		(6,427	)		(1,200	)		(8,574	)		(1,654	)
Net income from discontinued operations		11,937			2,229			15,922			3,073
Net income (loss)		12,142			2,457			9,144			(1,671	)
Net income attributable to non-controlling interest		(115	)		(175	)		(226	)		(254	)
Net income (loss) attributable to Transcontinental Realty Investors, Inc.		12,027			2,282			8,918			(1,925	)
Preferred dividend requirement		(277	)		(277	)		(551	)		(554	)
Net income (loss) applicable to common shares	$	11,750		$	2,005		$	8,367		$	(2,479	)
Earnings per share - basic
Loss from continuing operations	$	(0.02	)	$	(0.03	)	$	(0.90	)	$	(0.66	)
Income from discontinued operations		1.42			0.26			1.89			0.37
Net income(loss) applicable to common shares	$	1.40		$	0.23		$	0.99		$	(0.29	)
Earnings per share - diluted
Loss from continuing operations	$	(0.02	)	$	(0.03	)	$	(0.90	)	$	(0.66	)
Income from discontinued operations		1.42			0.26			1.89			0.37
Net income(loss) applicable to common shares	$	1.40		$	0.23		$	0.99		$	(0.29	)
Weighted average common share used in computing earnings per share		8,413,469			8,413,469			8,413,469			8,413,469
Weighted average common share used in computing diluted earnings per share		8,413,469			8,413,469			8,413,469			8,413,469
Amounts attributable to Transcontinental Realty Investors, Inc.
Income (loss) from continuing operations	$	90		$	53		$	(7,004	)	$	(4,998	)
Income from discontinued operations		11,937			2,229			15,922			3,073
Net income (loss)	$	12,027		$	2,282		$	8,918		$	(1,925	)

TRANSCONTINENTAL REALTY INVESTORS, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
	June 30,			December 31,
	2013			2012
	(dollars in thousands, except share and par value amounts)
Assets
Real estate, at cost	$	951,100		$	978,781
Real estate held for sale at cost, net of depreciation ($0 for 2013 and $4,658 for 2012)		-			18,077
Real estate subject to sales contracts at cost, net of depreciation ($1,773 for 2013 and $16,412 for 2012)		29,436			45,706
Less accumulated depreciation		(144,281	)		(145,614	)
Total real estate		836,255			896,950
Notes and interest receivable
Performing (including $57,683 in 2013 and $58,007 in 2012 from related parties)		60,655			60,637
Non-performing		752			723
Less allowance for estimated losses (including $2,097 in 2013 and 2012 from related parties)		(2,262	)		(2,262	)
Total notes and interest receivable		59,145			59,098
Cash and cash equivalents		8,994			16,620
Related party receivables		7,125			-
Investments in unconsolidated joint ventures and investees		5,740			5,439
Other assets		52,555			67,237
Total assets	$	969,814		$	1,045,344
Liabilities and Shareholders’ Equity
Liabilities:
Notes and interest payable	$	718,255		$	730,931
Notes related to assets held for sale		-			18,915
Notes related to subject to sales contracts		21,035			55,976
Stock-secured notes payable		2,204			2,221
Related party payables		-			10,057
Deferred gain (from sales to related parties)		53,096			53,096
Accounts payable and other liabilities (including $4,301 in 2013 and $4,282 in 2012 to related parties)		33,462			41,019
		828,052			912,215
Shareholders’ equity:
Preferred stock, Series C: $.01 par value, authorized 10,000,000 shares, issued and outstanding 30,000 shares in 2013 and 2012 respectively (liquidation preference $100 per share)   Series D: $.01 par value, authorized, issued and outstanding 100,000 shares in 2013 and 2012 respectively		1			1
Common stock, $.01 par value, authorized 10,000,000 shares; issued 8,413,669 shares in 2013 and 2012, and outstanding 8,413,469 shares in 2013 and 2012		84			84
Treasury stock at cost; 200 shares in 2013 and 2012		(2	)		(2	)
Paid-in capital		272,277			272,774
Retained earnings		(147,641	)		(156,559	)
Total Transcontinental Realty Investors, Inc. shareholders' equity		124,719			116,298
Non-controlling interest		17,043			16,831
Total equity		141,762			133,129
Total liabilities and equity	$	969,814		$	1,045,344