SOURCE: Resource America, Inc.

Resource America, Inc.

May 05, 2010 20:46 ET

Resource America, Inc. Reports Operating Results for the Second Fiscal Quarter Ended March 31, 2010

PHILADELPHIA, PA--(Marketwire - May 5, 2010) - Resource America, Inc. (NASDAQ: REXI) (the "Company") reported a loss from continuing operations attributable to common shareholders of $1.2 million, or $0.06 per common share-diluted and $259,000, or $0.01 per common share-diluted for the second fiscal quarter and six months ended March 31, 2010, respectively, as compared to a loss from continuing operations attributable to common shareholders of $11.5 million, or $0.62 per common share-diluted and $14.8 million, or $0.80 per common share-diluted for the second fiscal quarter and six months ended March 31, 2009, respectively.

Jonathan Cohen, CEO and President, commented, "We continue to make significant progress across our businesses. While we were pleased by events at Resource Capital, Apidos, and Resource Real Estate both during the quarter and immediately after it, we were disappointed by our loss this quarter after two profitable quarters; nonetheless we believe our recovery to stable profitability remains on track. We are in the middle of repositioning our leasing company which suffered this quarter in part as a result of costs incurred to solidify that valuable franchise."

The Company also reported:

--  Capital Fundraising. In December 2009, Resource Real Estate Holdings,
    Inc. ("Resource Real Estate") closed its real estate opportunity fund,
    which focuses on acquiring discounted real estate assets and related
    debt, having raised $41.4 million.

--  Resource Real Estate filed a $750.0 million registration statement
    with the Securities and Exchange Commission on July 7, 2009 for
    Resource Real Estate Opportunity REIT, Inc. of which Resource Real
    Estate will be the external manager.  Resource Real Estate recently
    filed a third amendment to the originally filed registration statement.

--  Debt Reduction.  As of March 31, 2010, the Company reduced its total
    consolidated borrowings outstanding to $144.5 million from
    $191.4 million as of September 30, 2009, a decrease of $46.9 million
    (25%).  At March 31, 2010, borrowings include $96.5 million of
    borrowings under a non-recourse credit facility at LEAF, $17.6 million
    of corporate revolving debt, $13.5 million of senior notes, net of a
    discount, and $16.9 million of other debt, of which $13.5 million is
    in mortgage debt secured by the underlying properties.

--  Adjusted Revenues and Adjusted Operating (Loss) Income -- Non-GAAP
    Measures.  For the second fiscal quarter and six months ended March
    31, 2010, the Company reported adjusted revenues of $19.4 million and
    $42.2 million, respectively, as compared to $25.9 million and
    $59.1 million for the second fiscal quarter and six months ended March
    31, 2009, respectively.  For the second fiscal quarter and six months
    ended March 31, 2010, the Company reported an adjusted operating loss
    of $1.9 million and $55,000, respectively, as compared to adjusted
    operating income of $2.7 million and $7.8 million for the second fiscal
    quarter and six months ended March 31, 2009, respectively.  Adjusted
    revenues and adjusted operating (loss) income excludes $29,000 and
    $2.6 million of pre-tax fair value gains for the second fiscal quarter
    and six months ended March 31, 2010, respectively, as compared to
    $1.2 million of pre-tax fair value gains and $37,000 of losses for the
    second fiscal quarter and six months ended March 31, 2009,
    respectively.  A reconciliation of the Company's total GAAP revenues
    and GAAP operating (loss) income to adjusted revenues and adjusted
    operating (loss) income is included in Schedule I to this release.

Assets Under Management

The following table details the Company's assets under management by operating segment, which decreased by $3.6 billion (22%) from March 31, 2009 to March 31, 2010:

                                                   At March 31,
                                         ----------------------------------
                                               2010              2009
                                         ----------------  ----------------
Financial fund management                $   10.3 billion  $   13.5 billion
Real estate                                   1.7 billion       1.7 billion
Commercial finance                            1.1 billion       1.5 billion
                                         ----------------  ----------------
                                         $   13.1 billion  $   16.7 billion
                                         ================  ================

A description of how the Company calculates assets under management is set forth in Item 1 of the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2009.

Book Value

As of March 31, 2010, the Company's GAAP book value per common share was $7.95 per share. Total stockholders' equity was $144.9 million as of March 31, 2010 as compared to $128.8 million as of March 31, 2009. Total common shares outstanding were 18,223,993 as of March 31, 2010 as compared to 17,900,293 as of March 31, 2009.

Other Highlights for the Second Fiscal Quarter Ended March 31, 2010 and Recent Developments

--  In April 2010, Resource Real Estate purchased three loans on behalf
    of RCC from the U.S. Department of Housing and Urban Development for
    approximately $44.2 million in partnership with an existing joint
    venture partner. These loans are secured by multifamily rental
    properties located in Atlanta Georgia, Cleveland Ohio and Prince
    George County Maryland.  In connection with the purchase of these
    three loans, the Company received a $440,000 debt acquisition fee and
    will receive asset management and property management fees going
    forward.

--  Resource Real Estate completed fundraising for Resource Real Estate
    Opportunity Fund L.P., ("RREI Opportunity Fund") a real estate
    partnership focused on investing in discounted real estate and related
    debt, having raised $41.4 million.

--  RREI Opportunity Fund acquired (i) a 296 unit multifamily rental
    property in Houston, Texas in January 2010, (ii) a 378 unit multifamily
    rental property in Memphis, Tennessee in March 2010, (iii) a 348 unit
    multifamily rental property in Houston, Texas in March 2010 and (iv)
    a 307 unit multifamily rental property in Houston, Texas in March 2010.
    In April 2010, RREI Opportunity Fund entered into contracts to sell 43
    of the 49 condominium units in Kansas City, Missouri that it acquired
    in June 2009.

--  Resource Real Estate Management, Inc., the Company's property
    management subsidiary, increased the apartment units it manages to
    14,456 units at 54 properties as of March 31, 2010 from 13,127 units
    at 50 properties as of December 31, 2009.

--  In January 2010, Resource Real Estate received net proceeds of $811,000
    in full satisfaction of a subordinate note that it held on a retail
    property located in Minnesota.  As a result of this sale, this
    previously consolidated entity was deconsolidated, thus further
    reducing the Company's debt by $1.0 million.

--  Resource Real Estate received $238,000 and recorded a gain of $106,000
    from the sale of an asset in one of its managed funds in which it owns
    an equity investment.

--  In April 2010, Resource Real Estate sold its 10% equity interests in
    two joint ventures that owned properties in Savannah, Georgia for
    $761,000.

--  The Company reduced its borrowings to $144.5 million at March 31, 2010,
    a decrease of $46.9 million from September 30, 2009.  This decrease
    primarily reflects a $40.0 million reduction in borrowings on LEAF's
    revolving warehouse credit facility and a $9.5 million reduction of the
    Company's two corporate revolving lines of credit.

--  The Company's Board of Directors authorized the payment on April 30,
    2010 of a $0.03 cash dividend per share on the Company's common stock
    to holders of record as of the close of business on March 31, 2010.

--  RCC paid a cash dividend of $0.25 per common share for its first
    quarter ended March 31, 2010.

Resource America, Inc. is a specialized asset management company that uses industry specific expertise to evaluate, originate, service and manage investment opportunities for its own account and for outside investors in the real estate, commercial finance and financial fund management sectors.

For more information, please visit our website at www.resourceamerica.com or contact investor relations at pkamdar@resourceamerica.com.

Statements made in this release include forward-looking statements, which involve substantial risks and uncertainties. The Company's actual results, performance or achievements could differ materially from those expressed or implied in this release and its other reports filed with the Securities and Exchange Commission. For information pertaining to risks relating to these forward-looking statements, reference is made to the section "Risk Factors" contained in Item 1A of the Company's Annual Report on Form 10-K. The Company undertakes no obligation to update or revise any forward-looking statements to reflect new or changing information or events except as may be required by law.

A registration statement relating to the securities to be offered by Resource Real Estate Opportunity REIT, Inc. has been filed with the Securities and Exchange Commission but has not yet become effective. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. A written prospectus may be obtained by contacting Chadwick Securities, Inc., 1845 Walnut Street, 10th Floor, Philadelphia, PA 19103.

This press release shall not constitute an offer to sell or a solicitation of an offer to buy any of the securities described herein, nor shall there be any sale of these securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.

The remainder of this release contains the Company's unaudited consolidated balance sheets, consolidated statements of operations, consolidated statements of cash flows, and reconciliation of GAAP revenues to adjusted revenues and reconciliation of GAAP operating (loss) income to adjusted operating (loss) income.


                             RESOURCE AMERICA, INC.
                           CONSOLIDATED BALANCE SHEETS
                        (in thousands, except share data)


                                                  March 31,   September 30,
                                                    2010          2009
                                                ------------  ------------
                                                (unaudited)   (as revised)
ASSETS
  Cash                                          $      7,324  $     26,197
  Restricted cash                                      2,547         2,741
  Receivables                                          2,245         1,358
  Receivables from managed entities and related
   parties, net                                       60,362        55,047
  Investments in commercial finance - held for
   investment, net                                       749         2,429
  Investments in commercial finance - held for
   sale, net                                         102,642       142,701
  Investments in real estate, net                     27,818        27,313
  Investment securities available-for-sale, at
   fair value                                         23,540        19,500
  Investments in unconsolidated entities              14,528        16,241
  Property and equipment, net                         10,332        13,435
  Deferred tax assets                                 43,055        45,656
  Goodwill                                             7,969         7,969
  Intangible assets, net                               3,239         3,637
  Other assets                                        16,514        11,616
                                                ------------  ------------
    Total assets                                $    322,864  $    375,840
                                                ============  ============

LIABILITIES AND EQUITY
Liabilities:
  Accrued expenses and other liabilities        $     31,883  $     40,986
  Payables to managed entities and related
   parties                                               197         1,284
  Borrowings                                         144,473       191,383
  Deferred tax liabilities                             2,046         2,046
                                                ------------  ------------
    Total liabilities                                178,599       235,699
                                                ------------  ------------

Commitments and contingencies

Equity:
  Preferred stock, $1.00 par value, 1,000,000
   shares authorized; none outstanding                     -             -
  Common stock, $.01 par value, 49,000,000 shares
   authorized; 28,162,141 and 27,757,849 shares
   issued, respectively (including nonvested
   restricted stock of 783,698 and 552,461,
   respectively)                                         274           272
  Additional paid-in capital                         280,183       277,944
  Accumulated deficit                                (23,820)      (22,471)
  Treasury stock, at cost; 9,154,450 and
   9,213,665 shares, respectively                    (99,722)     (100,367)
  Accumulated other comprehensive loss               (11,972)      (15,560)
                                                ------------  ------------
    Total stockholders' equity                       144,943       139,818
  Noncontrolling interests                              (678)          323
                                                ------------  ------------
    Total equity                                     144,265       140,141
                                                ------------  ------------
    Total liabilities and equity                $    322,864  $    375,840
                                                ============  ============




                            RESOURCE AMERICA, INC.
                   CONSOLIDATED STATEMENTS OF OPERATIONS
                   (in thousands, except per share data)
                                 (unaudited)



                        Three Months Ended           Six Months Ended
                            March 31,                   March 31,
                    --------------------------  --------------------------
                        2010          2009          2010          2009
                    ------------  ------------  ------------  ------------
REVENUES:                         (as revised)                (as revised)
Real estate         $      5,770  $      5,173  $     12,717  $     12,063
Commercial finance         7,409        13,335        16,232        28,486
Financial fund
 management                6,221         8,611        15,873        18,530
                    ------------  ------------  ------------  ------------
                          19,400        27,119        44,822        59,079
                    ------------  ------------  ------------  ------------
COSTS AND EXPENSES:
Real estate                5,516         5,370        10,243        11,288
Commercial finance         4,731         6,774         9,306        14,223
Financial fund
 management                4,700         5,082         9,404        10,810
General and
 administrative            2,768         3,670         6,200         7,678
(Gain) loss on sale
 of leases and
 loans                       (31)          (86)          551          (319)
Provision for
 credit losses             1,210           853         1,986         4,597
Depreciation and
 amortization              2,382         1,535         4,588         3,082
                    ------------  ------------  ------------  ------------
                          21,276        23,198        42,278        51,359
                    ------------  ------------  ------------  ------------
OPERATING (LOSS)
 INCOME                   (1,876)        3,921         2,544         7,720
                    ------------  ------------  ------------  ------------
OTHER (EXPENSE)
 INCOME:
Total other-than-
 temporary impairment
 losses on
 investment
 securities                 (297)       (3,039)         (297)       (7,962)
Portion recognized
 in other
 comprehensive loss            -             -             -             -
                    ------------  ------------  ------------  ------------
Net other-than-
 temporary impairment
 losses recognized
 in earnings                (297)       (3,039)         (297)       (7,962)
Loss on sale of
 loans and
 investment
 securities, net            (424)      (11,588)         (424)      (11,588)
Interest expense          (3,871)       (5,924)       (7,688)      (14,323)
Other income, net            637           544         1,207         2,243
                    ------------  ------------  ------------  ------------
                          (3,955)      (20,007)       (7,202)      (31,630)
                    ------------  ------------  ------------  ------------
Loss from continuing
 operations before
 taxes                    (5,831)      (16,086)       (4,658)      (23,910)
Income tax benefit        (3,986)       (3,460)       (3,401)       (7,606)
                    ------------  ------------  ------------  ------------
Loss from continuing
 operations               (1,845)      (12,626)       (1,257)      (16,304)
Loss from
 discontinued
 operations, net of
 tax                          (2)         (163)           (2)          (88)
                    ------------  ------------  ------------  ------------
Net loss                  (1,847)      (12,789)       (1,259)      (16,392)
Add: Net loss
 attributable to
 noncontrolling
 interests                   615         1,156           998         1,539
                    ------------  ------------  ------------  ------------
Net loss
 attributable to
 common
 shareholders       $     (1,232) $    (11,633) $       (261) $    (14,853)
                    ============  ============  ============  ============
Basic loss per
 share attributable
 to common
 shareholders:
Continuing
 operations         $      (0.06) $      (0.62) $      (0.01) $      (0.80)
Discontinued
 operations                    -         (0.01)            -         (0.01)
                    ------------  ------------  ------------  ------------
Net loss            $      (0.06) $      (0.63) $      (0.01) $      (0.81)
                    ============  ============  ============  ============
Weighted average
 shares outstanding       19,089        18,468        18,888        18,374
                    ============  ============  ============  ============
Diluted loss per
 share attributable
 to common
 shareholders:
Continuing
 operations         $      (0.06) $      (0.62) $      (0.01) $      (0.80)
Discontinued
 operations                    -         (0.01)            -         (0.01)
                    ------------  ------------  ------------  ------------
Net loss            $      (0.06) $      (0.63) $      (0.01) $      (0.81)
                    ============  ============  ============  ============
Weighted average
 shares outstanding       19,089        18,468        18,888        18,374
                    ============  ============  ============  ============
Dividends declared
 per common share   $       0.03  $       0.07  $       0.06  $       0.14
Amounts attributable
 to common
 shareholders:
Loss from continuing
 operations, net of
 tax                $     (1,230) $    (11,470) $       (259) $    (14,765)
Discontinued
 operations, net of
 tax                          (2)         (163)           (2)          (88)
                    ------------  ------------  ------------  ------------
Net loss            $     (1,232) $    (11,633) $       (261) $    (14,853)
                    ============  ============  ============  ============





                         RESOURCE AMERICA, INC.
                CONSOLIDATED STATEMENTS OF CASH FLOWS
                            (in thousands)
                              (unaudited)


                                                        Six Months Ended
                                                            March 31,
                                                      --------------------
                                                        2010       2009
                                                      ---------  ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss                                              $  (1,259) $ (16,392)
Adjustments to reconcile net loss to net cash
 provided by operating activities:
  Net other-than-temporary impairment losses
   recognized in earnings                                   297      7,962
  Depreciation and amortization                           6,721      4,156
  Provision for credit losses                             1,986      4,597
  Equity in earnings of unconsolidated entities          (3,441)      (199)
  Distributions from unconsolidated entities              2,701      3,053
  Loss (gain) on sale of leases and loans                   551       (319)
  Loss on sale of loans and investment securities, net      436     11,548
  Gain on sale of assets                                   (287)      (688)
  Deferred income tax provision (benefit)                    33    (14,520)
  Equity-based compensation issued                        2,014      2,775
  Equity-based compensation received                       (375)       (98)
Decrease in commercial finance investments -
 held for sale                                           37,182      4,390
Changes in operating assets and liabilities             (19,667)    (4,494)
                                                      ---------  ---------
Net cash provided by operating activities                26,892      1,771
                                                      ---------  ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures                                       (236)      (184)
Payments received on real estate loans and real
 estate                                                   2,885     10,036
Investments in real estate                               (1,512)    (2,232)
Purchase of commercial finance assets - held for
 investment                                                   -    (41,942)
Payments received on commercial finance assets - held
 for investment                                               -     33,643
Purchase of loans and investments                        (1,011)   (19,036)
Proceeds from sale of loans and investments               1,510     13,275
Principal payments received on loans                        333      3,975
Other                                                    (1,374)    (1,394)
                                                      ---------  ---------
Net cash provided by (used in) investing activities         595     (3,859)
                                                      ---------  ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in borrowings                                   71,001    263,714
Principal payments on borrowings                       (116,525)  (258,054)
Dividends paid                                           (1,088)    (2,480)
Decrease in restricted cash                                 194      9,326
Repurchase of subsidiary stock held by a
 noncontrolling stockholder                                   -       (264)
Other                                                        58        (69)
                                                      ---------  ---------
Net cash (used in) provided by financing activities     (46,360)    12,173
                                                      ---------  ---------

CASH FLOWS FROM DISCONTINUED OPERATIONS:
Operating activities                                          -         (8)
Financing activities                                          -        (77)
                                                      ---------  ---------
Net cash used in discontinued operations                      -        (85)
                                                      ---------  ---------
(Decrease) increase in cash                             (18,873)    10,000
Cash at beginning of year                                26,197     14,910
                                                      ---------  ---------
Cash at end of period                                 $   7,324  $  24,910
                                                      =========  =========





SCHEDULE I

          RECONCILIATION OF GAAP REVENUES TO ADJUSTED REVENUES
           AND RECONCILIATION OF GAAP OPERATING (LOSS) INCOME
                 TO ADJUSTED OPERATING (LOSS) INCOME
                            (in thousands)
                             (unaudited)


                                    Three Months Ended   Six Months Ended
                                        March 31,           March 31,
                                    ------------------  -------------------
                                      2010      2009      2010      2009
                                    --------  --------  --------  ---------

Revenues
  Real estate                       $  5,770  $  5,173  $ 12,717  $  12,063
  Commercial finance                   7,409    13,335    16,232     28,486
  Financial fund management            6,221     8,611    15,873     18,530
                                    --------  --------  --------  ---------
Total revenues - GAAP                 19,400    27,119    44,822     59,079

Adjustments:
  Fair value adjustments (1)             (29)   (1,181)   (2,599)        37
                                    --------  --------  --------  ---------
Adjusted revenues (2)               $ 19,371  $ 25,938  $ 42,223  $  59,116
                                    ========  ========  ========  =========

Operating (loss) income - GAAP      $ (1,876) $  3,921  $  2,544  $   7,720

Adjustments:
  Fair value adjustments (1)             (29)   (1,181)   (2,599)        37
                                    --------  --------  --------  ---------
Adjusted operating (loss) income
 (2)                                $ (1,905) $  2,740  $    (55) $   7,757
                                    ========  ========  ========  =========

(1) Reflects pre-tax fair value adjustments on investments reported under
    the equity method of accounting.
(2) Management of the Company views adjusted revenues and adjusted
    operating income, both non-GAAP measures, as useful and appropriate
    supplements to revenues and operating income since they exclude
    fair value adjustments related to current credit market conditions
    and are not indicative of the Company's current operating
    performance.

Contact Information

  • CONTACT:
    THOMAS C. ELLIOTT
    CHIEF FINANCIAL OFFICER
    RESOURCE AMERICA, INC.
    ONE CRESCENT DRIVE, SUITE 203
    PHILADELPHIA, PA 19112
    215/546-5005
    215/546-4785 (fax)