IMH Financial Corporation Reports Second Quarter 2015 Results
Adjusted Net income $4.4 million or $0.29 per Share
Adjusted EBITDA of $7.5 million, up 70% over 2014
SCOTTSDALE, Ariz., Aug. 19, 2015 /PRNewswire/ -- IMH Financial Corporation ("IMH" or "the Company") announced today that it filed its Quarterly Report on Form 10-Q for the period ended June 30, 2015 with the Securities and Exchange Commission on August 13, 2015. Adjusted EBITDA for the three months ended June 30, 2015 was $7.5 million or $0.49 per basic common share and $0.27 per diluted common share, compared to adjusted EBITDA of $4.4 million or $0.28 per common share for the same period in 2014.
"The Company had a strong second quarter," said Lawrence Bain, CEO and Chairman of IMH, "exceeding both budget and prior year results. While our hotel assets continue to contribute the bulk of our operating revenues, we expect that the extensive renovation project at our Sedona properties, which we scheduled to undertake during the third quarter -- typically the slowest season for those hotels -- will adversely affect our revenues in that quarter. The Company's second quarter results also reflect our successful efforts to achieve significant recoveries from various loan guarantors. We are very pleased to recognize the fruits of our enforcement and recovery efforts and are working to maximize the monetization of these assets. Finally, we have made substantial progress in the development of our multifamily project in Minnesota and are on track to complete construction and begin leasing by the middle of the third quarter of 2015."
Following are financial and operational highlights for the second quarter:
Second Quarter Highlights
- For the three months ended June 30, 2015, top line revenue (the sum of operating property revenue, investment and other income, and mortgage loan income) increased by 5.4%, to $9.4 million. The increase is due primarily to improved performance at the Company's operating hotels resulting from aggressive marketing efforts, offset by reductions in 1) mortgage income due to mortgage interest recorded on a modified loan in 2014 and 2) investment income recognized in 2014 related to our FX3 investment.
- Adjusted EBITDA for the three months ended June 30, 2015 was $7.5 million, a $3.1 million increase, or 69.8%, over Adjusted EBITDA for the same period in 2014. Basic Adjusted EBITDA per common share was $0.49 for the second quarter of 2015 compared to $0.28 for the same period in 2014. Diluted adjusted EBITDA per common share was $0.27 per common share for the second quarter of 2015 compared to $0.19 for the same period in 2014. The increase in Adjusted EBITDA was primarily attributable to the recoveries recorded in the second quarter of 2015 arising from our guarantor enforcement and collection efforts, coupled with reduced interest expense and depreciation recorded during the three months ended June 30, 2015.
- Adjusted net earnings for the three months ended June 30, 2015 was $4.4 million compared to adjusted net loss of $1.3 million for the same period in 2014. Basic adjusted net earnings per common share was $0.29 for the three months ended June 30, 2015 compared to adjusted net loss per common share of $0.08 for the same period in 2014. Diluted adjusted net earnings per common share was $0.16 for the three months ended June 30, 2015 compared to adjusted net loss per common share of $0.08 for the same period in 2014.
- Net income attributable to common shareholders for the three months ended June 30, 2015 was $3.5 million compared to a net loss attributable to common shareholders of $1.5 million for the same period in 2014. Basic net income per common share for the three months ended June 30, 2015 was $0.23 compared to net loss per common share $0.09 for the three months ended June 30, 2014. Diluted net income per common share for the three months ended June 30, 2015 was $0.13 compared to net loss per common share $0.09 for the three months ended June 30, 2014. The increases in net income attributable to common shareholders and in adjusted net earnings is primarily attributed to recoveries recorded during the period, coupled with reduced operating expenses, and offset by dividends the Company was contractually obligated to pay to holders of our preferred stock during the quarter ended June 30, 2015.
- The Company recorded recoveries totaling $9.7 million during the three months ended June 30, 2015 relating to our award of certain real estate and equity interests resulting from our enforcement efforts as described above while no recoveries were recorded in the corresponding period in 2014.
- Operating expenses were $13.6 million during the three months ended June 30, 2015, a reduction of $3.4 million, or 19.9% improvement, over the same period in 2014. Our lower operating expenses in the quarter were primarily attributed to reductions in our interest expense and professional fees. Interest expense was $2.4 million during the three months ended June 30, 2015, 48.8% less than our interest expense in the corresponding quarter in 2014, and we reduced our professional fees by $1.7 million or 61.8%, from the corresponding quarter in 2014.
- The Company recorded net losses from the disposal of assets of $0.2 million during the three months ended June 30, 2015, as compared to net gains from the disposal of assets of $6.6 million for the three months ended June 30, 2014. The quarter's net loss on disposal recorded related to the sale of 15 assets which, net of related selling costs, sold slightly below their collective carrying values and provided cash proceeds of $11.0 million. The net gain on disposal recorded during the three months ended June 30, 2014 arose from the sale of 10 assets which, net of related selling costs, provided cash proceeds of $24.5 million.
- Subsequent to June 30, 2015, we completed the sale of an REO asset for $16.0 million (net of selling costs), of which we financed $11.0 million in the form of a seller carry-back note.
Use of Non-GAAP Financial Information
Adjusted EBITDA and adjusted net earnings (loss) are considered "non-GAAP financial measures" under SEC guidelines. The Company believes that these non-GAAP financial measures provide a more complete understanding of ongoing operations and enhance comparability of current results to prior periods. The Company also believes that providing investors with this non-GAAP financial information, in addition to the related GAAP measures, gives investors greater transparency to the information used by management in its financial and operational decision-making. However, because under SEC guidelines these non-GAAP financial measures are considered an incomplete measure of the Company's financial performance and involves differences from net earnings (loss) computed in accordance with GAAP, it should be considered along with, and not as an alternative to, the Company's net loss computed in accordance with GAAP as a measure of the Company's financial performance.
A reconciliation of the Company's net loss attributable to common shareholders, as reported, to adjusted net earnings (loss) and adjusted EBITDA for the current and prior year's quarter follows (in thousands except per share data):
| Three months ended |
Six months ended |
|||||||||||||||
| 2015 |
2014 |
2015 |
2014 |
|||||||||||||
| Net Income (Loss) Attributable to Common Shareholders |
$ |
3,491 |
$ |
(1,454) |
$ |
(9) |
$ |
(4,460) |
||||||||
| Net Income Attributable to Noncontrolling Interests |
586 |
— |
586 |
— |
||||||||||||
| Cash Dividend on Redeemable Preferred Stock |
533 |
— |
1,061 |
— |
||||||||||||
| Deemed Dividend of Redeemable Preferred Stock |
571 |
— |
1,131 |
— |
||||||||||||
| Net Income (Loss), as reported |
5,181 |
(1,454) |
2,769 |
(4,460) |
||||||||||||
| Net Income Attributable to Noncontrolling Interests |
(586) |
— |
(586) |
— |
||||||||||||
| Non-cash Stock-based Compensation |
159 |
128 |
357 |
272 |
||||||||||||
| Non-cash Recovery of Credit Loss |
(501) |
— |
(501) |
— |
||||||||||||
| Non-cash Impairment Charge |
140 |
— |
140 |
— |
||||||||||||
| Adjusted Net Earnings (Loss) |
4,393 |
(1,326) |
2,179 |
(4,188) |
||||||||||||
| Interest Expense |
2,417 |
4,722 |
5,231 |
9,589 |
||||||||||||
| Depreciation and Amortization |
651 |
997 |
1,282 |
2,002 |
||||||||||||
| Adjusted EBITDA (Adjusted Earnings before Interest, |
||||||||||||||||
| Taxes, Depreciation, Amortization and One-time Charges) |
$ |
7,461 |
$ |
4,393 |
$ |
8,692 |
$ |
7,403 |
||||||||
| Basic and Diluted Earnings (Loss) per Common Share (Note 1): |
||||||||||||||||
| Basic Weighted Average Common Shares Outstanding |
15,279 |
15,940 |
15,265 |
16,384 |
||||||||||||
| Diluted Weighted Average Common Shares Outstanding |
27,690 |
23,171 |
27,690 |
23,615 |
||||||||||||
| Net Income (Loss) Attributable to Common Shareholders |
$ |
3,491 |
$ |
(1,454) |
$ |
(9) |
$ |
(4,460) |
||||||||
| Net Income (Loss) per Common Share, Basic |
$ |
0.23 |
$ |
(0.09) |
$ |
— |
$ |
(0.27) |
||||||||
| Net Income (Loss) per Common Share, Diluted |
$ |
0.13 |
$ |
(0.09) |
$ |
— |
$ |
(0.27) |
||||||||
| Adjusted Net Earnings (Loss) |
$ |
4,393 |
$ |
(1,326) |
$ |
2,179 |
$ |
(4,188) |
||||||||
| Adjusted Net Earnings (Loss) per Common Share, Basic |
$ |
0.29 |
$ |
(0.08) |
$ |
0.14 |
$ |
(0.26) |
||||||||
| Adjusted Net Earnings (Loss) per Common Share, Diluted |
$ |
0.16 |
$ |
(0.08) |
$ |
0.08 |
$ |
(0.26) |
||||||||
| Adjusted EBITDA |
$ |
7,461 |
$ |
4,393 |
$ |
8,692 |
$ |
7,403 |
||||||||
| Adjusted EBITDA per Common Share, Basic |
$ |
0.49 |
$ |
0.28 |
$ |
0.57 |
$ |
0.45 |
||||||||
| Adjusted EBITDA per Common Share, Diluted |
$ |
0.27 |
$ |
0.19 |
$ |
0.31 |
$ |
0.31 |
||||||||
| Note 1: |
For purposes of computing basic and diluted per share amounts, the amount of basic shares is used in the denominator in all instances where losses are reported for Net Income (Loss), Adjusted Net Earnings (Loss) and Adjusted EBITDA, as the inclusion of potentially dilutive securities would be anti-dilutive. |
A summary of selected financial information derived from the Company's Form 10-Q follows:
| IMH FINANCIAL CORPORATION |
||||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS |
||||||||
| (In thousands, except share data) |
||||||||
| June 30, |
December 31, |
|||||||
| Assets |
(Unaudited) |
|||||||
| Cash and Cash Equivalents |
$ |
9,806 |
$ |
1,915 |
||||
| Restricted Cash and Cash Equivalents |
19,655 |
2,573 |
||||||
| Mortgage Loans Held for Sale, Net |
10,969 |
24,539 |
||||||
| Real Estate Acquired through Foreclosure Held for Sale |
50,300 |
53,686 |
||||||
| Real Estate Acquired through Foreclosure Held for Development |
18,633 |
8,205 |
||||||
| Operating Properties Acquired through Foreclosure |
83,900 |
83,481 |
||||||
| Deferred Financing Costs, Net |
2,791 |
754 |
||||||
| Other Receivables |
3,274 |
2,816 |
||||||
| Investment in Unconsolidated Entities |
3,064 |
— |
||||||
| Other Assets |
2,940 |
3,149 |
||||||
| Property and Equipment, Net |
582 |
654 |
||||||
| Total Assets |
$ |
205,914 |
$ |
181,772 |
||||
| Liabilities |
||||||||
| Accounts Payable and Accrued Expenses |
$ |
7,487 |
$ |
6,079 |
||||
| Accrued Property Taxes |
529 |
785 |
||||||
| Accrued Interest Payable |
724 |
1,635 |
||||||
| Customer Deposits and Funds Held for Others |
2,964 |
2,064 |
||||||
| Notes Payable, Net of Discount |
90,208 |
69,010 |
||||||
| Notes Payable to Related Party |
5,000 |
5,000 |
||||||
| Capital Lease Obligation |
1,186 |
1,199 |
||||||
| Special Assessment Obligations |
4,732 |
4,981 |
||||||
| Total Liabilities |
112,830 |
90,753 |
||||||
| Redeemable Convertible Preferred Stock, $.01 par value; 100,000,000 shares authorized; 8,200,000 outstanding; liquidation preference of $39,570 at June 30, 2015 and December 31, 2014 |
28,460 |
27,329 |
||||||
| Commitments and Contingent Liabilities |
||||||||
| Stockholders' Equity |
||||||||
| Common stock, $.01 par value; 200,000,000 shares authorized; 16,908,880 and 16,873,880 shares issued at June 30, 2015 and December 31, 2014, respectively; 15,279,062 and 15,244,062 shares outstanding at June 30, 2015 and December 31, 2014, respectively |
169 |
169 |
||||||
| Less: Treasury stock, 1,629,818 shares at June 30, 2015 and December 31, 2014 |
(5,948) |
(5,948) |
||||||
| Paid-in Capital |
724,354 |
726,189 |
||||||
| Accumulated Deficit |
(654,537) |
(656,720) |
||||||
| Total IMH Financial Corporation Stockholders' Equity |
64,038 |
63,690 |
||||||
| Noncontrolling Interests |
586 |
— |
||||||
| Total Stockholders' Equity |
64,624 |
63,690 |
||||||
| Total Liabilities and Stockholders' Equity |
$ |
205,914 |
$ |
181,772 |
||||
| IMH FINANCIAL CORPORATION |
|||||||||||||||
| UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS |
|||||||||||||||
| (In thousands, except share data) |
|||||||||||||||
| Three Months Ended |
Six Months Ended |
||||||||||||||
| 2015 |
2014 |
2015 |
2014 |
||||||||||||
| Revenue: |
|||||||||||||||
| Operating Property Revenue |
$ |
8,894 |
$ |
7,689 |
$ |
16,078 |
$ |
13,727 |
|||||||
| Investment and Other Income |
304 |
553 |
2,154 |
890 |
|||||||||||
| Mortgage Loan Income, Net |
175 |
650 |
673 |
870 |
|||||||||||
| Total Revenue |
9,373 |
8,892 |
18,905 |
15,487 |
|||||||||||
| Operating Expenses: |
|||||||||||||||
| Operating Property Direct Expenses (Exclusive of Interest and Depreciation) |
6,573 |
6,236 |
12,217 |
11,243 |
|||||||||||
| Expenses for Non-Operating Real Estate Owned |
325 |
593 |
613 |
1,146 |
|||||||||||
| Professional Fees |
1,045 |
2,739 |
2,291 |
5,361 |
|||||||||||
| General and Administrative Expenses |
2,547 |
1,642 |
4,740 |
3,154 |
|||||||||||
| Interest Expense |
2,417 |
4,722 |
5,231 |
9,589 |
|||||||||||
| Depreciation and Amortization Expense |
651 |
997 |
1,282 |
2,002 |
|||||||||||
| Total Operating Expenses |
13,558 |
16,929 |
26,374 |
32,495 |
|||||||||||
| Recovery of Credit Losses, Impairment Charges, and Loss (Gain) on Disposal |
|||||||||||||||
| Loss (Gain) on Disposal of Assets, Net |
239 |
(6,583) |
282 |
(12,000) |
|||||||||||
| Provision for (Recovery of) Credit Losses, Net |
(9,745) |
— |
(10,660) |
(548) |
|||||||||||
| Impairment of Real Estate Owned |
140 |
— |
140 |
— |
|||||||||||
| Total Recovery of Credit Losses, Impairment Charges, and Loss (Gain) on Disposal of Assets |
(9,366) |
(6,583) |
(10,238) |
(12,548) |
|||||||||||
| Total Costs and Expenses |
4,192 |
10,346 |
16,136 |
19,947 |
|||||||||||
| Income (Loss) before Income Taxes |
5,181 |
(1,454) |
2,769 |
(4,460) |
|||||||||||
| Provision for Income Taxes |
— |
— |
— |
— |
|||||||||||
| Net Income (Loss) |
5,181 |
(1,454) |
2,769 |
(4,460) |
|||||||||||
| Net Income Attributable to Noncontrolling Interests |
(586) |
— |
(586) |
— |
|||||||||||
| Cash Dividend on Redeemable Convertible Preferred Stock |
(533) |
— |
(1,061) |
— |
|||||||||||
| Deemed Dividend on Redeemable Convertible Preferred Stock |
(571) |
— |
(1,131) |
— |
|||||||||||
| Net Income (Loss) Attributable to Common Shareholders |
$ |
3,491 |
$ |
(1,454) |
$ |
(9) |
$ |
(4,460) |
|||||||
| Earnings (loss) per common share |
|||||||||||||||
| Basic |
$ |
0.23 |
$ |
(0.09) |
$ |
— |
$ |
(0.27) |
|||||||
| Diluted |
0.13 |
(0.09) |
— |
(0.27) |
|||||||||||
| Basic Weighted Average Common Shares Outstanding |
15,279,062 |
15,939,966 |
15,264,946 |
16,383,629 |
|||||||||||
| Dilutive Effect of Common Share Equivalents |
12,411,209 |
— |
— |
— |
|||||||||||
| Diluted Weighted Average Common Shares Outstanding |
27,690,271 |
15,939,966 |
15,264,946 |
16,383,629 |
|||||||||||
| IMH FINANCIAL CORPORATION |
||||||||
| UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
||||||||
| (In thousands) |
||||||||
| Six Months Ended June 30, |
||||||||
| 2015 |
2014 |
|||||||
| OPERATING ACTIVITIES |
||||||||
| Net Income (Loss) |
$ |
2,769 |
$ |
(4,460) |
||||
| Adjustments to reconcile net income (loss) to net cash used in operating activities: |
||||||||
| Impairment of Real Estate Owned |
140 |
— |
||||||
| Non-cash Investment in Unconsolidated Entities |
(3,064) |
— |
||||||
| Non-cash Recovery of Real Estate Owned |
(6,824) |
— |
||||||
| Non-cash Recovery of Credit Losses |
(501) |
— |
||||||
| Stock-Based Compensation and Option Amortization |
357 |
272 |
||||||
| Loss (Gain) on Disposal of Assets |
282 |
(12,000) |
||||||
| Amortization of Deferred Financing Costs |
923 |
1,363 |
||||||
| Depreciation and Amortization Expense |
1,282 |
2,002 |
||||||
| Accretion of Mortgage Income |
(138) |
(524) |
||||||
| Accretion of Discount on Notes Payable |
297 |
1,145 |
||||||
| Increase (decrease) in cash resulting from changes in: |
||||||||
| Accrued Interest Receivable |
(344) |
85 |
||||||
| Other Receivables |
(458) |
(497) |
||||||
| Other Assets |
416 |
(505) |
||||||
| Accrued Property Taxes |
(262) |
(338) |
||||||
| Accounts Payable and Accrued Expenses |
4,561 |
(159) |
||||||
| Customer Deposits and Funds Held For Others |
900 |
224 |
||||||
| Accrued Interest Payable |
(911) |
2,126 |
||||||
| Total adjustments, net |
(3,344) |
(6,806) |
||||||
| Net cash used in operating activities |
(575) |
(11,266) |
||||||
| INVESTING ACTIVITIES |
||||||||
| Proceeds from Sales of Mortgage Loans |
13,674 |
— |
||||||
| Proceeds from Sale/Recovery of Real Estate Owned |
11,592 |
39,841 |
||||||
| Purchases of Property and Equipment |
(34) |
(8) |
||||||
| Issuance of Other Notes Receivables |
— |
(2,100) |
||||||
| Mortgage Loan Fundings and Protective Advances |
(289) |
— |
||||||
| Mortgage Loan Repayments |
183 |
5,589 |
||||||
| Collection of Other Notes Receivables |
— |
2,100 |
||||||
| Investment in Real Estate Owned |
(16,196) |
(2,529) |
||||||
| Net cash provided by investing activities |
8,930 |
42,893 |
||||||
| FINANCING ACTIVITIES |
||||||||
| Proceeds from Notes Payable |
82,373 |
262 |
||||||
| Proceeds from Convertible Notes Payable |
— |
70 |
||||||
| Debt Issuance Costs Paid |
(2,960) |
(710) |
||||||
| Increase in Restricted Cash |
(17,082) |
(10,782) |
||||||
| Repayments of Notes Payable |
(61,721) |
(17,510) |
||||||
| Purchase of Notes Payable |
— |
(1,289) |
||||||
| Repayments of Capital Leases |
(13) |
(25) |
||||||
| Dividends Paid |
(1,061) |
— |
||||||
| Net cash used in financing activities |
(464) |
(29,984) |
||||||
| Six Months Ended June 30, |
||||||||
| 2015 |
2014 |
|||||||
| NET INCREASE IN CASH AND CASH EQUIVALENTS |
7,891 |
1,643 |
||||||
| CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD |
1,915 |
7,875 |
||||||
| CASH AND CASH EQUIVALENTS, END OF PERIOD |
$ |
9,806 |
$ |
9,518 |
||||
| SUPPLEMENTAL CASH FLOW INFORMATION: |
||||||||
| Interest paid |
$ |
4,196 |
$ |
5,543 |
||||
| Real Estate Acquired Through Guarantor Settlement |
$ |
6,824 |
$ |
— |
||||
| Non-Cash Construction-in- Process Additions in Accounts Payable and Accrued Liabilities |
$ |
3,153 |
$ |
— |
||||
About IMH Financial Corporation
IMH Financial Corporation is a Scottsdale, Arizona based real estate investment and finance company. As a public reporting entity, IMH files periodic reports with the SEC. For additional financial and other important information pertaining to IMH, individuals can visit www.sec.gov and reference CIK #1397403.
Forward-Looking Statements
Our future plans and other statements made in this release about expectations, beliefs, projections, future plans and strategies, anticipated events or trends, and similar expressions concerning matters that are not historical facts constitute forward-looking statements. In some cases, you can identify forward looking statements by terms such as "anticipate," "believe," "could," "estimate," "feel," "expect," "intend," "likely," "may," "plan," "potential," "should," "see," "hope," "view," and "would" or the negative of these terms or other comparable terminology. Forward-looking statements are subject to a number of risks and uncertainties, related to the Company that can be found under the heading "Risk Factors" in the Company's most recent annual report on Form 10-K and other filings with the SEC.
These forward looking statements are based on information currently available to us and actual results may differ as a result of many possible events or factors, not all of which are known to us or are within our control. If a change occurs, our business, financial condition, liquidity, and results of operations may vary materially from those expressed in our forward-looking statements. These forward-looking statements are made only as of the date hereof and we undertake no obligation, and disclaim any duty, to update or revise any forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. You should not place undue reliance on these forward-looking statements.
SOURCE IMH Financial Corporation
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