SOURCE: Resource America, Inc.

January 31, 2007 09:37 ET

Resource America, Inc. Reports Operating Results for First Fiscal Quarter Ended December 31, 2006

PHILADELPHIA, PA -- (MARKET WIRE) -- January 31, 2007 -- Resource America, Inc. (NASDAQ: REXI) (the "Company") reported for the first fiscal quarter ended December 31, 2006, revenues of $24.0 million, operating income of $9.3 million, income from continuing operations before income taxes and a cumulative effect of a change in accounting principle of $6.7 million, income from continuing operations of $4.5 million, or $0.23 per common share-diluted and net income of $4.4 million, or $0.23 per common share-diluted.

Assets under management increased to $13.6 billion at December 31, 2006 from $8.6 billion at December 31, 2005, an increase of $5.0 billion (58%).

For the first fiscal quarter ended December 31, 2005, revenues were $17.2 million, operating income was $5.7 million, income from continuing operations before income taxes and a cumulative effect of a change in accounting principle was $3.8 million, income from continuing operations was $5.4 million, or $0.27 per common share-diluted and net income was $7.7 million, or $0.39 per common share-diluted. Income from continuing operations was impacted by $3.2 million of tax benefit. Without this tax benefit, income from continuing operations before cumulative effect of a change in accounting principle would have been $2.2 million, or $0.11 per common share-diluted. This compares to income from continuing operations before a cumulative effect of a change in accounting principle of $3.8 million or $0.20 per common share diluted for the quarter ended December 31, 2006, excluding a tax benefit of $662,000. Net income included discontinued operations of $938,000, or $0.05 per common share-diluted and a cumulative effect of a change in accounting principle of $1.4 million, or $0.07 per common share-diluted.

The following table details assets under management by operating segment:

                                                  At December 31,
                                          --------------------------------
                                               2006               2005
                                          --------------      -------------
Financial fund management                 $ 11.7 billion (1)  $ 7.5 billion
Real estate                                  1.2 billion        0.7 billion
Commercial finance                           0.7 billion        0.4 billion
                                          --------------      -------------
                                          $ 13.6 billion      $ 8.6 billion
                                          ==============      =============


(1) Includes assets under management of $2.0 billion at December 31, 2006
    on warehouse facilities for which the Company has been engaged as the
    collateral manager for CDOs not yet closed.
Operating income as adjusted, before depreciation and amortization, was $10.0 million for the first fiscal quarter ended December 31, 2006, as compared to $6.5 million for the first fiscal quarter ended December 31, 2005. The following reconciles operating income as adjusted to operating income (in thousands):
                                                     Three Months Ended
                                                        December 31,
                                                  -------------------------
                                                      2006         2005
                                                  ------------ ------------
Operating income                                  $      9,301 $      5,669
Plus:
   Depreciation and amortization                           709          838
                                                  ------------ ------------
   Operating income as adjusted                   $     10,010 $      6,507
                                                  ============ ============
Management of the Company believes that operating income as adjusted provides additional information with respect to the Company's ability to meet its debt service, capital expenditures and working capital requirements. This measure is similar to earnings before interest, taxes, depreciation and amortization, or EBITDA, a commonly used measure of a business' ability to generate cash flow without consideration of its financing structure. EBITDA is widely used by commercial banks, investment bankers, rating agencies and investors in evaluating performance relative to peers and pre-set performance standards. Neither adjusted operating income nor EBITDA are measures of financial performance under generally accepted accounting principles, or GAAP, and, accordingly, should not be considered as a substitute for net income or cash flows from operating activities prepared in accordance with GAAP.

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

A description of how the Company calculates assets under management is set forth in item 1 of the Company's Form 10-K for the fiscal year ended September 30, 2006.

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

Highlights for the First Fiscal Quarter Ended December 31, 2006 and Recent Developments

CORPORATE:

--  In December 2006 and January 2007, Resource Capital Corp. ("RCC")
    (NYSE: RSO) completed a secondary offering and over-allotment exercise for
    a total of 6.7 million of its shares at $16.50 per share ($15.5925 net of
    underwriting discount) generating net proceeds of $103.1 million which was
    principally used to repay outstanding debt.  The closing price of RSO on
    January 30, 2007 was $18.68.
--  The Company's Board of Directors has authorized the payment of an
    increased cash dividend on February 28, 2007 in the amount of $0.07 per
    share on the Company's common stock.  The new quarterly cash dividend
    represents a 17% increase from the Company's formerly quarterly cash
    dividend of $0.06 per share.
--  The Company increased its book value per share to $11.48 at December
    31, 2006 from $11.17 at September 30, 2006.
--  The Company hired Joan Sapinsley as Managing Director in charge of
    CMBS for its financial fund asset manager.
    
FINANCIAL FUND MANAGEMENT:
--  The Company's financial fund management operating segment increased
    its assets under management by $4.2 billion (56%) to $11.7 billion at
    December 31, 2006 from $7.5 billion at December 31, 2005.
--  Financial fund management revenues increased by $4.9 million (66%) to
    $12.4 million for the first fiscal quarter ended December 31, 2006 from
    $7.5 million for the first fiscal quarter ended December 31, 2005.
--  Apidos Capital Management, LLC ("Apidos"), the Company's wholly owned
    subsidiary focusing on investing, financing, structuring and managing bank
    loans, increased its managed assets to $2.3 billion at December 31, 2006
    from $616.5 million at December 31, 2005.
--  Ischus Capital Management, LLC ("Ischus"), the Company's wholly owned
    subsidiary focusing on investing, financing, structuring and managing asset-
    backed securities, including residential mortgage-backed and commercial
    mortgage-backed securities, increased its managed assets to $4.9 billion at
    December 31, 2006 from $3.6 billion at December 31, 2005.
--  Trapeza Capital Management ("Trapeza"), the Company's fund manager
    that originates, structures, finances and manages trust preferred
    securities and senior debt securities of banks, bank holding companies,
    insurance companies and other financial companies, increased its managed
    assets to $4.3 billion at December 31, 2006 from $3.3 billion at December
    31, 2005.
--  Resource Europe Management ("Resource Europe"), the Company's European
    bank loan asset manager, increased its managed assets to $244.6 million at
    December 31, 2006 from $91.3 million at September 30, 2006.  Resource
    Europe began acquiring loans during the quarter ended September 30, 2006.
--  During the three months ended December 31, 2006, the Company closed
    three CDO vehicles financing $1.0 billion of asset-backed securities,
    $500.0 million of trust-preferred securities and $350.5 million of bank
    loans.
--  Resource Europe entered into a warehousing arrangement with a third
    party underwriter to begin ramping their second CLO transaction which is
    expected to close in the Company's fourth quarter of fiscal 2007.
    
REAL ESTATE:
--  Resource Real Estate Holdings, Inc. ("RRE"), the Company's real estate
    asset manager that invests in and manages investment vehicles that manage
    real estate assets and operates the Company's commercial real estate debt
    platform, increased its assets under management to $1.2 billion at December
    31, 2006, an increase of $483.0 million (71%) from December 31, 2005.
--  RRE's most recent limited partnership, Resource Real Estate IV, raised
    $29.7 million in equity and closed its offering in January 2007.
    
COMMERCIAL FINANCE:
--  LEAF Financial Corporation ("LEAF"), the Company's commercial finance
    asset manager, increased its commercial finance originations to $129.1
    million for the first fiscal quarter ended December 31, 2006, an increase
    of $24.7 million (24%) from the first fiscal quarter ended December 31,
    2005.
--  Commercial finance assets under management increased to $681.6 million
    at December 31, 2006, an increase of $267.7 million (65%) from December 31,
    2005.
--  Commercial finance revenues increased to $7.1 million for the first
    fiscal quarter ended December 31, 2006 from $5.1 million (40%) for the
    first fiscal quarter ended December 31, 2005.
--  LEAF entered into a $250.0 million revolving non-recourse credit
    facility with Morgan Stanley Bank which will be used primarily to finance
    its asset-backed loans to other commercial finance companies, medical and
    dental practice acquisitions loans and middle ticket lease and loan
    originations.
    
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. For information pertaining to risks relating to these forward-looking statements, reference is made to the section "Risk Factors" contained in Item 1 of the Company's Annual Report on Form 10-K.

The remainder of this release contains the Company's consolidated balance sheets, consolidated statements of operations and consolidated statements of cash flows.

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


                                               December 31,  September 30,
                                                   2006          2006
                                               ------------  -------------
                                               (unaudited)
ASSETS
  Cash                                         $     19,868  $      37,622
  Restricted cash                                    13,897          8,103
  Receivables from managed entities                  10,587          8,795
  Investments in commercial finance                 172,334        108,850
  Loans held for investment                         283,198         69,314
  Investments in real estate                         49,492         50,104
  Investment securities available-for-sale           70,277         64,857
  Investments in unconsolidated entities             34,280         26,626
  Property and equipment, net                         9,277          9,525
  Deferred income taxes                               7,070          6,408
  Other assets                                       33,541         26,549
                                               ------------  -------------
    Total assets                               $    703,821  $     416,753
                                               ============  =============

LIABILITIES AND STOCKHOLDERS' EQUITY
  Accounts payable                             $      9,483  $      12,448
  Accrued expenses and other liabilities             22,754         17,078
  Payables to managed entities                        1,250          1,579
  Borrowings                                        449,874        172,238
  Deferred income tax liabilities                    12,458         10,746
  Minority interests                                  9,370          9,602
                                               ------------  -------------
    Total liabilities                               505,189        223,691
                                               ------------  -------------

  Commitments and contingencies                           -              -

Stockholders' equity:
  Preferred stock, $1.00 par value, 1,000,000
   shares authorized; none outstanding                    -              -
  Common stock, $.01 par value, 49,000,000
   shares authorized; 26,408,298 and
   26,401,708 shares issued, respectively               264            264
  Additional paid-in capital                        260,296        259,882
  Retained earnings                                  28,870         25,464
  Treasury stock, at cost; 9,109,151 and
   9,110,290 shares, respectively                   (96,948)       (96,960)
  ESOP loan receivable                                 (459)          (465)
  Accumulated other comprehensive income              6,609          4,877
                                               ------------  -------------
    Total stockholders' equity                      198,632        193,062
                                               ------------  -------------
                                               $    703,821  $     416,753
                                               ============  =============


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

                                                       Three Months Ended
                                                           December 31,
                                                        ------------------
                                                          2006      2005
                                                        --------  --------
REVENUES
Financial fund management                               $ 12,387  $  7,479
Real estate                                                4,564     4,654
Commercial finance                                         7,089     5,081
                                                        --------  --------
                                                          24,040    17,214
COSTS AND EXPENSES
Financial fund management                                  4,552     2,299
Real estate                                                3,013     2,265
Commercial finance                                         3,631     2,918
General and administrative                                 2,834     3,225
Depreciation and amortization                                709       838
                                                        --------  --------
                                                          14,739    11,545
                                                        --------  --------
OPERATING INCOME                                           9,301     5,669

OTHER INCOME (EXPENSE)
Interest expense                                          (4,591)   (2,296)
Minority interest                                           (560)     (402)
Other income, net                                          2,528       873
                                                        --------  --------
                                                          (2,623)   (1,825)
                                                        --------  --------
Income from continuing operations before taxes and
 cumulative effect of a change in accounting
 principle                                                 6,678     3,844
Provision (benefit) for income taxes                       2,210    (1,537)
                                                        --------  --------
Income from continuing operations before cumulative
 effect of a change in accounting principle                4,468     5,381
(Loss) income from discontinued operations, net of tax       (19)      938
Cumulative effect of a change in accounting principle,
 net of tax                                                    -     1,357
                                                        --------  --------
NET INCOME                                              $  4,449  $  7,676
                                                        ========  ========

Basic earnings per common share:
Continuing operations                                   $   0.26  $   0.30
Discontinued operations                                        -      0.05
Cumulative effect of accounting change                         -      0.08
                                                        --------  --------
Net income                                              $   0.26  $   0.43
                                                        ========  ========
Weighted average shares outstanding                       17,292    18,055
                                                        ========  ========

Diluted earnings per common share:
Continuing operations                                   $   0.23  $   0.27
Discontinued operations                                        -      0.05
Cumulative effect of accounting change                         -      0.07
                                                        --------  --------
Net income                                              $   0.23  $   0.39
                                                        ========  ========
Weighted average shares outstanding                       19,122    19,986
                                                        ========  ========

Dividends declared per common share                     $   0.06  $   0.06



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

                                                        Three Months Ended
                                                            December 31,
                                                          ----------------
                                                            2006   2005 (1)
                                                          -------  -------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                                $ 4,449  $ 7,676
Adjustments to reconcile net income to net cash used in
  operating activities:
   Cumulative effect of a change in accounting
    principle, net of tax                                       -   (1,357)
   Depreciation and amortization                              810      861
   Distributions from unconsolidated entities               3,941    3,675
   Equity in earnings of unconsolidated entities           (3,981)  (1,981)
   Minority interest earnings                                 560      402
   Loss (income) from discontinued operations                  19     (938)
   Gain on sale of investment securities
    available-for-sale                                     (1,347)       -
   Deferred income tax benefit                               (671)  (3,190)
   Gain on asset dispositions                                 (74)    (879)
   Non-cash compensation on long-term incentive plans         401      310
   Non-cash compensation issued                               797      361
   Non-cash compensation received                            (673)    (821)
Increase in commercial finance investments                (63,594) (26,523)
Changes in operating assets and liabilities                (7,680)   1,965
                                                          -------  -------
Net cash used in operating activities of continuing
 operations                                               (67,043) (20,439)
                                                          -------  -------

CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in real estate                                (10,188)  (9,963)
Payments received on real estate loans and real estate      3,256    8,366
Purchases of investment securities available-for-sale      (5,795)  (4,453)
Proceeds from sale of available-for-sale securities         3,381    3,500
(Increase) decrease in restricted cash                     (5,639)   5,000
Capital expenditures                                         (219)  (1,080)
Decrease (increase) in other assets                         1,769     (515)
                                                          -------  -------
Net cash (used in) provided by investing activities of
  continuing operations                                   (13,435)     855
                                                          -------  -------

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


                                                        Three Months Ended
                                                           December 31,
                                                        ------------------
                                                          2006    2005 (1)
                                                        --------  --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in borrowings                                   161,507   123,930
Principal payments on borrowings                         (97,751)  (99,398)
Dividends paid                                            (1,043)   (1,082)
Proceeds from issuance of stock                               25        40
Purchase of treasury stock                                     -    (3,681)
                                                        --------  --------
Net cash provided by financing activities of continuing
 operations                                               62,738    19,809
                                                        --------  --------

CASH FLOWS FROM DISCONTINUED OPERATIONS:
Operating activities                                         (14)     (976)
Investing activities                                           -    17,020
                                                        --------  --------
Net cash (used in) provided by discontinued operations       (14)   16,044
Net cash retained by entities previously consolidated          -    (3,825)
                                                        --------  --------
(Decrease) increase in cash                              (17,754)   12,444
Cash at beginning of period                               37,622    30,353
                                                        --------  --------
Cash at end of period                                   $ 19,868  $ 42,797
                                                        ========  ========

(1) Revised presentation to reflect detail of cash flows from discontinued
    operations.

Reconciliation of Net Cash Used In Operating Activities of Continuing Operations to Net Cash Provided By Operating Activities of Continuing Operations As Adjusted

Net cash provided by operating activities of continuing operations as adjusted was $4.2 million for the first fiscal quarter ended December 31, 2006, an increase of $112,000 as compared to net cash provided by operating activities of $4.1 million in the first fiscal quarter ended December 31, 2005. The following reconciles net cash provided by continuing operations as adjusted to net cash used in operating activities of continuing operations (in thousands):

                                                       Three Months Ended
                                                          December 31,
                                                      --------------------
                                                        2006       2005
                                                      ---------  ---------
Net used in operating activities of continuing
 operations                                           $ (67,043) $ (20,439)

Adjustments:
   Increase in equipment finance investments             63,594     26,523
   Changes in operating assets and liabilities            7,680     (1,965)
                                                      ---------  ---------
      Net cash provided by operating activities of
       continuing operations,  as adjusted            $   4,231  $   4,119
                                                      =========  =========

Contact Information

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