SOURCE: Resource America, Inc.

Resource America, Inc.

February 07, 2011 20:00 ET

Resource America, Inc. Reports Operating Results for the First Fiscal Quarter Ended December 31, 2010

PHILADELPHIA, PA--(Marketwire - February 7, 2011) - Resource America, Inc. (NASDAQ: REXI) (the "Company") reported adjusted net income attributable to common shareholders, a non-GAAP measure, of $1.6 million, or $0.08 per common share-diluted, for the first fiscal quarter ended December 31, 2010, as compared to adjusted net income attributable to common shareholders of $1.1 million, or $0.06 per common share-diluted, for the first fiscal quarter ended December 31, 2009. A reconciliation of the Company's reported GAAP net (loss) income attributable to common shareholders to adjusted net income attributable to common shareholders, a non-GAAP measure, is included as Schedule I to this release.

For the first fiscal quarter ended December 31, 2010, the Company reported a GAAP net loss attributable to common shareholders of $567,000, or $0.03 per common share-diluted, as compared to GAAP net income attributable to common shareholders of $971,000, or $0.05 per common share-diluted, for the first fiscal quarter ended December 31, 2009.

The GAAP net loss attributable to common shareholders for the first fiscal quarter ended December 31, 2010 was primarily the result of losses generated from LEAF Financial Corporation ("LEAF"), the Company's commercial finance operating segment, and deferred tax asset adjustments. Schedule I reflects the removal of these items to derive adjusted net income attributable to common shareholders.

Jonathan Cohen, CEO and President, commented, "We continue to make progress scaling our business. We are seeing substantial growth in management fees generated from real estate products including our new non-traded REIT and from Resource Capital Corp, our publicly traded externally managed REIT. We are starting to see growth at Apidos Capital and across Resource Financial Fund Management. During the quarter, we re-capitalized LEAF and are now starting to grow that business. We also executed on the sale of certain non-core assets and built up our cash position while continuing to lower our net-debt. We are pleased but are now looking for scale."

Assets Under Management

The following table details the Company's assets under management by operating segment, which decreased by $1.3 billion (10%) from December 31, 2009 to December 31, 2010:

                                               At December    At December
                                                 31, 2010       31, 2009
                                              -------------- --------------
Financial fund management                     $  9.7 billion $ 10.4 billion
Real estate                                      1.5 billion    1.7 billion
Commercial finance                               0.8 billion    1.2 billion
                                              -------------- --------------
                                              $ 12.0 billion $ 13.3 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, 2010.

Book Value

As of December 31, 2010, the Company's book value per common share was $7.31 per share. Total stockholders' equity was $134.0 million as of December 31, 2010 as compared to $142.3 million as of December 31, 2009. Total common shares outstanding were 18,320,863 as of December 31, 2010 as compared to 18,036,643 as of December 31, 2009.

Highlights for the First Fiscal Quarter Ended December 31, 2010 and Recent Developments

LEASING:

-- In January 2011, LEAF raised or obtained commitments for up to
   approximately $236 million of equity and debt capital to expand its
   leasing platform through its new lease origination and servicing
   subsidiary, LEAF Commercial Capital, Inc. ("LEAF Commercial").  LEAF
   Commercial is a joint venture among LEAF, Resource Capital Corp. ("RCC")
   and Guggenheim Securities, LLC ("Guggenheim").  RCC and Guggenheim
   committed to investing up to $44 million of capital in the form of
   preferred stock and subordinated debt into LEAF Commercial.  In
   addition, Guggenheim has arranged a new financing facility for LEAF
   Commercial of up to $192 million in revolving senior debt to fund new
   originations.

-- Securitizations: Since May 2010, LEAF has completed five securitization
   transactions totaling $700 million on behalf of affiliates for which it
   manages leasing portfolios.  These transactions have been term funded
   through the issuance of contract-backed notes and LEAF will continue to
   service these securitization pools.


REAL ESTATE:

-- Fundraising:  Resource Real Estate ("RRE"), the Company's real estate
   operating segment, has sponsored and is the external manager of Resource
   Real Estate Opportunity REIT, Inc. ("RRE Opportunity REIT"), which is a
   public real estate program.  Through February 1, 2011, RRE Opportunity
   REIT has raised approximately $27.7 million and has made the acquisition
   described below.

-- Acquisitions:

   - In December 2010, RRE purchased through RRE Opportunity REIT, a loan
     secured by a first lien mortgage on a multifamily rental property in
     Birmingham, Alabama for $6.3 million.  In connection with this
     purchase, the Company received $126,000 in acquisition fees and will
     receive asset management and property management fees in the future.

   - In October 2010, RRE purchased a loan through RCC for $8.1 million
     with an existing joint venture partner.  The loan is secured by two
     multifamily rental properties located in Decatur, Georgia. In
     connection with this purchase, the Company received $82,000 in
     acquisition fees and will receive asset management and property
     management fees in the future.

-- Property Management: Resource Real Estate Management, Inc., the
   Company's property management subsidiary, increased the apartment units
   it manages to 14,128 units at 51 properties as of December 31, 2010 from
   13,127 units at 50 properties as of December 31, 2009.


FINANCIAL FUND MANAGEMENT:

-- Sale of Management Agreement/Equity: In December 2010, the Company's
   subsidiary, Resource Europe Management Limited ("REM"), completed the
   sale and assignment of REM's rights, title and interest in the
   management agreement for Resource Europe CLO I B.V. ("REM I"), a EUR 300
   million collateralized loan obligation.  In connection with the sale and
   assignment of the management agreement, Resource Financial Fund
   Management, Inc., the Company's structured finance operating segment
   ("RFFM"), sold its equity interest in REM I.  The aggregate purchase
   price of the assets sold by REM and RFFM was approximately
   $11.1 million, net of transaction costs, and as a result of this
   transaction, the Company recorded a net gain of $5.1 million.

-- Additional Management Engagement:  In November 2010, a subsidiary of
   RFFM was awarded the management contract for an existing $255 million
   third-party collateralized debt obligation issuer for which it will
   receive future management fees.


CORPORATE:

-- Decreased Borrowings: As of December 31, 2010, the Company reduced its
   consolidated borrowings outstanding by $108.4 million, or 62%, to $65.6
   million from $174.0 million at December 31, 2009.  This decrease
   primarily reflects the repayment and termination of the commercial
   finance credit facility, which had a $124.9 million balance at December
   31, 2009.  At December 31, 2010, borrowings include $21.8 million in
   non-recourse short-term bridge financing for its commercial finance
   operations, $12.8 million of corporate revolving debt, $14.8 million of
   senior notes (net of a discount) and $16.2 million of other debt (of
   which $13.4 million is in mortgage debt secured by the underlying
   properties).

-- Share Repurchase Plan: The Company's Board of Directors authorized a new
   share repurchase plan on December 17, 2010 under which the Company may
   buy up to $20.0 million of its outstanding common stock, replacing a
   share repurchase plan that had been approved by the Board in July 2007.

-- Dividends:  The Company's Board of Directors authorized the payment on
   January 31, 2011 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 January
   21, 2011.  RCC, its externally managed REIT, declared a cash dividend of
   $0.25 per common share for its fourth quarter ended December 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 and in other of its public filings with the Securities and Exchange Commission. 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 securities offered by RRE Opportunity REIT was declared effective by the SEC on June 16, 2010. A written prospectus relating to these securities 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 net (loss) income attributable to common shareholders to adjusted net income attributable to common shareholders.

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

                                                 December 31, September 30,
                                                      2010         2010
                                                  -----------  -----------
                                                  (unaudited)
ASSETS
  Cash                                            $    14,530  $    11,243
  Restricted cash                                       5,401       12,018
  Receivables                                             622        1,671
  Receivables from managed entities and related
   parties, net                                        62,016       66,416
  Investments in commercial finance, net               22,286       12,176
  Investments in real estate, net                      27,462       27,114
  Investment securities, at fair value                 21,716       22,358
  Investments in unconsolidated entities               14,387       13,825
  Property and equipment, net                           9,364        9,984
  Deferred tax assets                                  42,010       43,703
  Goodwill                                              7,969        7,969
  Other assets                                          5,411        5,776
                                                  -----------  -----------
    Total assets                                  $   233,174  $   234,253
                                                  ===========  ===========

LIABILITIES AND EQUITY
Liabilities:
  Accrued expenses and other liabilities          $    35,661  $    38,492
  Payables to managed entities and related
   parties                                                952          156
  Borrowings                                           65,640       66,110
  Deferred tax liabilities                                411          411
                                                  -----------  -----------
    Total liabilities                                 102,664      105,169
                                                  -----------  -----------

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; 28,171,720 and 28,167,909 shares
   issued, respectively (including nonvested
   restricted stock of 732,308 and 741,086,
   respectively)                                          274          274
  Additional paid-in capital                          282,062      281,378
  Accumulated deficit                                 (38,676)     (37,558)
  Treasury stock, at cost; 9,118,549 and
   9,125,253 shares, respectively                     (99,245)     (99,330)
  Accumulated other comprehensive loss                (10,431)     (12,807)
                                                  -----------  -----------
    Total stockholders' equity                        133,984      131,957
  Noncontrolling interests                             (3,474)      (2,873)
                                                  -----------  -----------
    Total equity                                      130,510      129,084
                                                  -----------  -----------
                                                  $   233,174  $   234,253
                                                  ===========  ===========




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

                                                       Three Months Ended
                                                          December 31,
                                                      --------------------
                                                        2010       2009
                                                      ---------  ---------
REVENUES
Real estate                                           $   6,874  $   6,947
Commercial finance                                        1,476      8,823
Financial fund management                                 8,330      9,652
                                                      ---------  ---------
                                                         16,680     25,422
                                                      ---------  ---------
COSTS AND EXPENSES
Real estate                                               5,461      4,727
Commercial finance                                        4,273      4,575
Financial fund management                                 6,720      4,704
General and administrative                                3,116      3,432
(Gain) loss on sale of leases and loans                     (11)       582
Provision for credit losses                               1,606        776
Depreciation and amortization                             1,125      2,206
                                                      ---------  ---------
                                                         22,290     21,002
                                                      ---------  ---------
OPERATING (LOSS) INCOME                                  (5,610)     4,420
                                                      ---------  ---------

OTHER INCOME (EXPENSE)
Gain on the sale of assets                                6,520          -
Loss on sale of investment securities, net               (1,470)         -
Interest expense                                         (2,369)    (3,817)
Other income, net                                         1,095        570
                                                      ---------  ---------
                                                          3,776     (3,247)
                                                      ---------  ---------
(Loss) income from operations before taxes               (1,834)     1,173
Income tax (benefit) provision                             (642)       585
                                                      ---------  ---------
Net (loss) income                                        (1,192)       588
Add:  Net loss attributable to noncontrolling
 interests                                                  625        383
                                                      ---------  ---------
Net (loss) income attributable to common shareholders $    (567) $     971
                                                      =========  =========

Basic (loss) income per share attributable to common
 shareholders:
Net (loss) income                                     $   (0.03) $    0.05
                                                      =========  =========
Weighted average shares outstanding                      19,076     18,689
                                                      =========  =========

Diluted (loss) income per share attributable to
 common shareholders:
Net (loss) income                                     $   (0.03) $    0.05
                                                      =========  =========
Weighted average shares outstanding                      19,076     18,962
                                                      =========  =========

Dividends declared per common share                   $    0.03  $    0.03
                                                      =========  =========




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


                                                       Three Months Ended
                                                          December 31,
                                                      --------------------
                                                        2010       2009
                                                      ---------  ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income                                     $  (1,192) $     588
Adjustments to reconcile net (loss) income to net
 cash used in operating activities:
  Depreciation and amortization                           1,911      3,173
  Provision for credit losses                             1,606        776
  Equity in earnings of unconsolidated entities          (1,427)    (3,405)
  Distributions from unconsolidated entities                663      1,261
  (Gain) loss on sale of leases and loans                   (11)       582
  Loss on sale of loans and investment securities,
   net                                                    1,470          -
  Gain on resolution of assets                               (9)      (244)
  Gain on sale of management contract                    (6,520)         -
  Deferred income tax benefit                               422         34
  Equity-based compensation issued                          781      1,120
  Equity-based compensation received                        (57)      (375)
Decrease in commercial finance investments                    -      8,386
Changes in operating assets and liabilities                (611)   (13,049)
                                                      ---------  ---------
Net cash used in operating activities                    (2,974)    (1,153)
                                                      ---------  ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures                                        (38)      (118)
Investments in unconsolidated real estate entities         (283)         -
Purchase of commercial finance assets                   (10,690)         -
Proceeds from sale of management contract                 9,095          -
Purchase of loans and investments                             -     (1,640)
Proceeds from sale of loans and investment securities     2,946      2,274
                                                      ---------  ---------
Net cash provided by investing activities                 1,030        516
                                                      ---------  ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in borrowings                                    1,000     45,701
Principal payments on borrowings                         (1,908)   (62,326)
Dividends paid                                             (551)      (540)
Decrease (increase) in debt financing costs                  73       (496)
Decrease in restricted cash                               6,617        510
                                                      ---------  ---------
Net cash provided by (used in) financing activities       5,231    (17,151)
                                                      ---------  ---------

Increase (decrease) in cash                               3,287    (17,788)
Cash at beginning of year                                11,243     26,197
                                                      ---------  ---------
Cash at end of period                                 $  14,530  $   8,409
                                                      =========  =========




SCHEDULE I


     RECONCILIATION OF GAAP NET (LOSS) INCOME ATTRIBUTABLE TO COMMON
        SHAREHOLDERS TO ADJUSTED NET INCOME ATTRIBUTABLE TO COMMON
                            SHAREHOLDERS (1)
                  (in thousands, except per share data)
                              (unaudited)

                                                        Three Months Ended
                                                           December 31,
                                                        -------------------
                                                          2010      2009
                                                        --------  ---------
Net (loss) income attributable to common
 shareholders - GAAP                                    $   (567) $     971
Adjustments, net of tax:
  Loss from commercial finance operations (2)              1,735         67
  Deferred tax assets                                        422         92
                                                        --------  ---------
Adjusted net income attributable to common shareholders $  1,590  $   1,130
                                                        ========  =========

Adjusted weighted average diluted shares outstanding (3)  20,313     18,962
                                                        ========  =========

Adjusted net income attributable to common shareholders
 per common share-diluted                               $   0.08  $    0.06
                                                        ========  =========

(1) Adjusted net income attributable to common shareholders presents the
    Company's operations without the effect of its commercial finance
    operations. The Company believes that this provides useful information
    to investors since it allows investors to evaluate the Company's
    progress in both its real estate and financial fund management segments
    for the three months ended December 31, 2010 and 2009 separately from
    its commercial finance operations, which have been severely impacted by
    a reduction in liquidity and lack of availability of credit. Adjusted
    net income attributable to common shareholders should not be considered
    as an alternative to net (loss) income attributable to common
    shareholders (computed in accordance with GAAP).  Instead, adjusted net
    income attributable to common shareholders should be reviewed in
    connection with net (loss) income attributable to common shareholders
    in the Company's consolidated financial statements, to help analyze how
    the Company's business is performing.
(2) Loss from commercial finance operations consists of revenues and
    expenses from commercial finance operations (including gains or losses
    from the sale of leases and loans, provision for credit losses and
    depreciation and amortization) net of applicable tax benefits and
    non-controlling interests.
(3) Dilutive shares used in the calculation of adjusted net income
    attributable to common shareholders per common share-diluted includes
    an additional 1.2 million shares for the three months ended December
    31, 2010 which were anti-dilutive for the period and, as such, were not
    used in the calculation of GAAP net loss attributable to common
    shareholders per common share-diluted.

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)