SOURCE: Resource America, Inc.

December 11, 2007 20:29 ET

Resource America, Inc. Reports Operating Results for the Fourth Quarter and Fiscal Year Ended September 30, 2007

PHILADELPHIA, PA--(Marketwire - December 11, 2007) - Resource America, Inc. (NASDAQ: REXI) (the "Company") reported adjusted income from continuing operations, a non-GAAP measure, of $4.2 million, or $0.22 per common share-diluted, and $20.0 million, or $1.05 per common share-diluted for the fourth quarter and fiscal year ended September 30, 2007, respectively, as compared to $3.9 million, or $0.21 per common share-diluted, and $17.3 million, or $0.90 per common share-diluted, for the fourth quarter and fiscal year ended September 30, 2006, respectively.

For the fourth quarter of fiscal 2007, the Company reported revenues of $33.3 million, operating income of $15.0 million, a loss from continuing operations and a net loss of $10.0 million, or $.57 per common share-diluted, as compared to revenues of $22.7 million, operating income of $8.1 million, income from continuing operations of $3.9 million, or $0.21 per common share-diluted, and net income of $4.1 million, or $0.22 per common share-diluted, for the fourth quarter of fiscal 2006.

For the fiscal year ended September 30, 2007, the Company reported revenues of $127.8 million, operating income of $58.7 million, income from continuing operations of $5.8 million, or $0.30 per common share-diluted, and net income of $4.4 million, or $0.23 per common share-diluted, as compared to revenues of $78.2 million, operating income of $27.3 million, income from continuing operations of $17.3 million, or $0.90 per common share-diluted and net income of $19.9 million, or $1.04 per common share-diluted, for the fiscal year ended September 30, 2006.

The Company also reports:

--  It is providing guidance for its fiscal year ending September 30,
    2008.  Net income is expected to be betweeen $1.20 and $1.40 per common
    share-diluted.
--  LEAF Financial Corporation ("LEAF"), the Company's commercial finance
    asset management subsidiary, is expected to contribute approximately
    $26.0 to $30.0 million of pre-tax earnings before minority interest to
    the Company for the fiscal year ending September 30, 2008, reflecting
    the acquisition, on behalf of its investment partnerships, of the loan
    portfolios and businesses of NetBank Business Finance and Dolphin
    Capital Corp, both of which were acquired in November 2007.  Including
    these acquisitions, LEAF's assets under management increased to
    approximately $1.7 billion at November 30, 2007 and its fiscal 2008
    annual origination capacity is expected to exceed $1.0 billion.
--  Apidos Capital Management, the Company's corporate loan manager,
    priced Apidos VI CLO, a $240.0 million securitization of corporate
    loans, on November 20, 2007, with closing anticipated on December 19,
    2007, after which closing the Company's total at-risk warehouse
    exposure will be $10.2 million, after taxes.
--  During the fiscal year ended September 30, 2007, the Company raised,
    through its financial planner network, a total of $145.2 million of
    equity for investment funds and programs that it manages.  The current
    annualized run-rate based on fund raising activities during the fourth
    quarter ended September 30, 2007 is $184.4 million. The Company expects
    to raise over $200.0 million in capital through this channel in fiscal
    2008.
--  The Company repurchased 188,000 shares of its common stock at an
    average price of $15.03 since announcing its new share repurchase
    program in July 2007.
--  The Company has adjusted its operations in light of recent market
    conditions and, as a result has:
    --  recorded, net of tax, a $7.6 million charge to reflect
        other-than-temporary impairment of certain investments, primarily
        equity investments in portfolios of asset-backed securities managed
        by the Company.  The Company's remaining exposure to investments in
        asset-backed securities, net of minority interest and on a fair
        value basis, was $1.3 million at September 30, 2007; and
    --  reduced its exposure to corporate bank loans, principally in
        Europe, by incurring a $2.6 million loss, net of tax, from the sale
        of loans held for investment and incurred a charge of $2.9 million,
        net of tax, related to a European real estate investment fund that
        did not close due to market conditions.

A reconciliation of the Company's reported loss from continuing operations to adjusted income from continuing operations. a non-GAAP measure, is included as Schedule I to this release.

Jonathan Cohen, President and CEO of the Company commented, "We have moved quickly to capitalize on opportunities created by the dislocations in the market brought about by the environment that has existed since July. We believe that we have positioned ourselves for a solid fiscal 2008 led by (i) the expansion of LEAF Financial, our leasing and loan asset management company, (ii) a lowering of risk through the completion of Apidos VI CLO (thus reducing our warehouse exposure substantially) and (iii) the focus on building our retail distribution system. We are raising significant capital in the retail channel for our products and this contributes to the substantial growth in assets under management. Acquisitions of quality assets in a distressed environment is another way that we have expanded our assets under management -- and one can see from the recent LEAF acquisitions how this can positively impact our bottom line. We believe more of these opportunities will exist. In addition, we are focused on expanding our distressed loan management business which we have restarted with the HUD portfolio acquisition."

Assets under management increased to $16.7 billion at September 30, 2007 from $12.1 billion at September 30, 2006, an increase of $4.6 billion (38%). As of November 30, 2007, assets under management had further increased to $17.3 billion.

The following table details the Company's assets under management by operating segment:

                                                   At September 30,
                                            -------------------------------
                                                 2007            2006
                                            --------------- ---------------
Financial fund management                   $ 14.0  billion $  10.6 billion
Real estate                                    1.6  billion     0.9 billion
Commercial finance                             1.1  billion     0.6 billion
                                            --------------- ---------------
                                            $ 16.7  billion $  12.1 billion
                                            =============== ===============

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 commercial finance, real estate and financial fund management sectors.

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. The Company intends to file its Annual Report on Form 10-K for the fiscal year ended September 30, 2007 on or before December 14, 2007.

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


Highlights for the Fourth Quarter, Fiscal Year Ended September 30, 2007 and Recent Developments


--  On November 30, 2007, LEAF acquired the business of Dolphin Capital
    Corp., an equipment finance subsidiary of Lehman Brothers Bank, FSB.  The
    total purchase price of $171.0 million included a portfolio of small ticket
    leases acquired by LEAF and immediately assigned to an investment
    partnership it sponsored and manages.  LEAF will retain the Dolphin lease
    origination team and management platform in Moberly, Missouri.
--  On November 7, 2007, LEAF acquired at a discount substantially all of
    the assets, including a portfolio of over 10,000 equipment leases and loans
    to small businesses, of NetBank Business Finance, a division of NetBank,
    from the Federal Deposit Insurance Corporation, for $415.2 million.  LEAF
    intends to sell the assets acquired to its investment partnerships prior to
    June 2008.  Additionally, LEAF will retain the NetBank management team and
    origination platform in Columbia, South Carolina.
--  In June 2007, LEAF acquired substantially all of the assets of the
    leasing division of Pacific Capital Bank N.A. ("PCB"), principally a
    portfolio of small ticket leases and notes, at a total cost of $282.2
    million.  LEAF's investment partnerships acquired $269.5 million of leases
    and notes.  LEAF retained the PCB lease origination and management platform
    as well as an experienced small ticket leasing team including senior
    management, originations, and operations personnel that will continue to
    operate in Santa Barbara, California.
--  LEAF increased its assets under management to $1.1 billion at
    September 30, 2007, an increase of $480.0 million (78%) from September 30,
    2006.  LEAF increased its commercial finance originations to $779.2 million
    for fiscal 2007, an increase of $355.6 million (84%) from fiscal 2006.
--  Resource Real Estate Holdings, Inc. ("RRE"), the Company's real estate
    asset manager that invests in and manages real estate investment vehicles
    for itself and for outside investors and which operates the Company's
    commercial real estate debt platform, has been pursuing opportunities in
    distressed real estate and real estate loans.  A partnership that RRE
    sponsored and is managing acquired a portfolio of non-performing loans at a
    discount from the United States Department of Housing and Urban Development
    consisting of 11 loans with an aggregate principal balance of approximately
    $75.0 million, each secured by a first mortgage on a multifamily property.
--  RRE increased its assets under management to $1.6 billion at September
    30, 2007, an increase of $0.7 billion (85%) from September 30, 2006.
--  RRE increased its apartment units managed to 15,682 at September 30,
    2007, an increase of 6,322 (68%) from September 30, 2006.
--  RRE established a new property management division to manage the
    majority of its investment programs as of October 1, 2007.
--  The Company's financial fund management operating segment increased
    its assets under management at September 30, 2007 to $14.0 billion, an
    increase of $3.4 billion (32%) from September 30, 2006.
--  The Company established a new division that will seek to sponsor
    investment vehicles that will make majority private equity investments for
    outside investors focused in commercial banks.  This division will augment
    the Company's existing private equity programs that have raised $62.1
    million to make minority investments in de novo banks.  The Company hired
    Kent Carstater, formerly a principal in the investment banking group at
    Keefe, Bruyette & Woods, an investment bank specializing in the financial
    services sector, to lead the new effort.
--  The Company's bank loan business had three outstanding warehouse
    facilities as of September 30, 2007, with an aggregate outstanding balance
    of $439.5 million, of which $152.7 million in assets were sold but not yet
    settled.  Upon settlement, the warehouse debt will be reduced by $152.7
    million.  In addition, on November 20, 2007, the Company priced Apidos VI
    CLO, a $240.0 million collateralized loan obligation ("CLO") which will
    lower the Company's warehouse borrowings by another $164.4 million, leaving
    $122.4 million of loans on the two remaining warehouses.
--  The Company's Board of Directors authorized the payment of a cash
    dividend on February 29, 2008 in the amount of $0.07 per share of the
    Company's common stock to all holders of record at the close of business on
    February 15, 2008.  Resource Capital Corp. ("RCC") (NYSE: RSO), a real
    estate investment trust which the Company is the external manager, declared
    and paid a dividend of $0.41 per share during the fourth quarter.
    

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 1A 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, consolidated statements of cash flows, a reconciliation of GAAP (loss) income from continuing operations to adjusted income from continuing operations and a reconciliation of net cash (used in) operating activities of continuing operations to net cash provided by operating activities of continuing operations, as adjusted.

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


                                                          September 30,
                                                      --------------------
                                                        2007       2006
                                                      ---------  ---------
ASSETS
  Cash                                                $  14,624  $  37,622
  Restricted cash                                        19,340      8,103
  Receivables                                            21,255      2,312
  Receivables from managed entities                      20,177      8,795
  Loans sold, not settled                               152,706          -
  Loans held for investment, net                        285,928     69,314
  Investments in commercial finance, net                243,391    108,850
  Investments in real estate, net                        49,041     50,104
  Investment securities available-for-sale               51,777     64,857
  Investments in unconsolidated entities                 36,777     26,626
  Property and equipment, net                            12,286      9,525
  Deferred income taxes                                  30,995      6,408
  Goodwill                                                7,941          -
  Intangible assets, net                                  4,774         95
  Other assets                                           18,664     24,142
                                                      ---------  ---------
    Total assets                                      $ 969,676  $ 416,753
                                                      =========  =========

LIABILITIES AND STOCKHOLDERS' EQUITY
  Accounts payable, accrued expenses and other
   liabilities                                           60,546     29,526
  Payables to managed entities                            1,163      1,579
  Borrowings                                            706,372    172,238
  Deferred income tax liabilities                        11,124     10,746
  Minority interests                                      6,571      9,602
                                                      ---------  ---------
    Total liabilities                                   785,776    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; 26,986,975 and 26,485,227 shares
   issued, respectively (including unvested
   restricted stock of 199,708 and 83,519,
   respectively)                                            268        264
  Additional paid-in capital                            264,747    259,882
  Retained earnings                                      25,724     25,464
  Treasury stock, at cost; 9,369,960 and 9,110,290
   shares, respectively                                (102,014)   (96,960)
  ESOP loan receivable                                     (223)      (465)
  Accumulated other comprehensive (loss) income          (4,602)     4,877
                                                      ---------  ---------
    Total stockholders' equity                          183,900    193,062
                                                      ---------  ---------
                                                      $ 969,676  $ 416,753
                                                      =========  =========





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


                                    Three Months Ended      Years Ended
                                      September 30,        September 30,
                                    ------------------  ------------------
                                      2007      2006      2007      2006
                                    --------  --------  --------  --------
                                        (Unaudited)
REVENUES:
Financial fund management           $ 16,640  $ 10,639  $ 64,151  $ 31,308
Commercial finance                    12,231     7,357    40,692    23,840
Real estate                            4,407     4,716    22,987    23,076
                                    --------  --------  --------  --------
                                      33,278    22,712   127,830    78,224
COSTS AND EXPENSES:
Financial fund management              5,386     4,335    21,264    12,099
Commercial finance                     6,074     4,061    19,681    14,443
Real estate                            3,011     3,257    13,190    11,522
General and administrative             2,990     2,250    12,104     9,838
Depreciation and amortization            768       709     2,924     3,064
                                    --------  --------  --------  --------
                                      18,229    14,612    69,163    50,966
                                    --------  --------  --------  --------

OPERATING INCOME                      15,049     8,100    58,667    27,258

OTHER (EXPENSE) INCOME:
Interest expense                     (11,105)   (4,560)  (33,566)  (10,119)
Minority interests                       113      (539)   (2,142)   (1,775)
Other (loss) income, net             (20,813)    1,510   (14,395)    5,154
                                    --------  --------  --------  --------
                                     (31,805)   (3,589)  (50,103)   (6,740)
                                    --------  --------  --------  --------
(Loss) income from continuing
 operations before taxes and
 cumulative effect of a change in
 accounting principle                (16,756)    4,511     8,564    20,518
(Benefit) provision for income
 taxes                                (6,713)      657     2,764     3,236
                                    --------  --------  --------  --------
(Loss) income from continuing
 operations before cumulative
 effect of a change in accounting
 principle                           (10,043)    3,854     5,800    17,282
Income (loss) from discontinued
 operations, net of tax                   60       254    (1,446)    1,231
Cumulative effect of a change in
 accounting principle, net of tax          -         -         -     1,357
                                    --------  --------  --------  --------
NET (LOSS) INCOME                   $ (9,983) $  4,108  $  4,354  $ 19,870
                                    ========  ========  ========  ========

Basic (loss) earnings per common
 share:
Continuing operations               $  (0.57) $   0.22  $   0.33  $   0.98
Discontinued operations                    -      0.02     (0.08)     0.07
Cumulative effect of accounting
 change                                    -         -         -      0.08
                                    --------  --------  --------  --------
Net (loss) income                   $  (0.57) $   0.24  $   0.25  $   1.13
                                    ========  ========  ========  ========
Weighted average shares outstanding   17,482    17,329    17,467    17,627
                                    ========  ========  ========  ========

Diluted (loss) earnings per common
 share:
Continuing operations               $  (0.57) $   0.21  $   0.30  $   0.90
Discontinued operations                    -      0.01     (0.07)     0.07
Cumulative effect of accounting
 change                                    -         -         -      0.07
                                    --------  --------  --------  --------
Net (loss) income                   $  (0.57) $   0.22  $   0.23  $   1.04
                                    ========  ========  ========  ========
Weighted average shares outstanding   17,482    18,915    19,085    19,121
                                    ========  ========  ========  ========

Dividends declared per common share $   0.07  $   0.06  $   0.27  $   0.24





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



                                                          Years Ended
                                                          September 30,
                                                      --------------------
                                                        2007       2006
                                                      ---------  ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                            $   4,354  $  19,870
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)
   Impairment charge on CDO investments                  12,580          -
   Depreciation and amortization                          3,699      3,180
   Equity in earnings of unconsolidated entities        (15,022)    (8,747)
   Minority interests                                     2,142      1,775
   Distributions from unconsolidated entities            16,212     12,570
   Loss (income) from discontinued operations             1,446     (1,231)
   Losses on sales of loans                               5,025          -
   Gains on sales of investment securities
    available-for-sale                                   (3,533)      (668)
   Gains on sales of assets                              (3,974)    (7,715)
   Deferred income tax benefit                          (14,487)    (3,120)
   Non-cash compensation on long-term incentive plans     2,695      1,739
   Non-cash compensation issued                           1,861      2,396
   Non-cash compensation received                        (1,404)    (1,844)
Increase in commercial finance investments              (67,210)   (68,376)
Changes in operating assets and liabilities               5,790     14,074
                                                      ---------  ---------
Net cash used in operating activities of continuing
 operations                                             (49,826)   (37,454)
                                                      ---------  ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures                                     (5,441)    (4,141)
Payments received on real estate loans and real
 estate                                                  17,501     42,058
Investments in real estate                              (20,917)   (33,004)
Purchase of investments                                 (23,225)   (34,820)
Proceeds from sale of investments                         7,172      7,205
Net cash paid for acquisition                           (20,708)         -
Increase in other assets                                 (2,862)   (13,821)
                                                      ---------  ---------
Net cash used in investing activities of continuing
 operations                                             (48,480)   (36,523)
                                                      ---------  ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in borrowings                                  745,598    570,448
Principal payments on borrowings                       (649,055)  (501,088)
Dividends paid                                           (4,770)    (4,251)
Distributions paid to minority interest holders          (2,368)    (1,600)
Proceeds from issuance of stock                           1,226        133
Increase in restricted cash                             (10,156)    (3,103)
Purchase of treasury stock                               (5,368)   (14,642)
Tax benefit from exercise of stock options                2,090        231
Other                                                      (611)         -
                                                      ---------  ---------
Net cash provided by financing activities of
 continuing operations                                   76,586     46,128
CASH FLOWS FROM DISCONTINUED OPERATIONS:
Operating activities                                       (133)     1,771
Investing activities                                          -     37,172
Financing activities                                     (1,145)         -
                                                      ---------  ---------
Net cash (used in) provided by discontinued
 operations                                              (1,278)    38,943
Net cash retained by entities previously consolidated         -     (3,825)
                                                      ---------  ---------
(Decrease) increase in cash                             (22,998)     7,269
Cash at beginning of period                              37,622     30,353
                                                      ---------  ---------
Cash at end of period                                 $  14,624  $  37,622
                                                      =========  =========





Schedule I

      RECONCILIATION OF GAAP (LOSS) INCOME FROM CONTINUING OPERATIONS
              TO ADJUSTED INCOME FROM CONTINUING OPERATIONS
                  (in thousands, except per share data)
                                (Unaudited)


                                 Three Months Ended       Years Ended
                                    September 30,         September 30,
                                --------------------  ---------------------
                                  2007       2006       2007       2006
                                ---------  ---------- ---------- ----------
(Loss) income from continuing
 operations - GAAP              $ (10,043) $    3,854 $    5,800 $   17,282
Adjustments, net of taxes:
   Impairment charge on CDO
    investments                     7,617           -      7,617          -
   Loss on sales of loans           2,648           -      2,648          -
   Write off of European real
    estate investment fund costs    2,885           -      2,885          -
   Incentive fee and restricted
    stock - RCC                       772           -        772          -
   Mark to market of partnership
    interest                          291           -        291          -
                                ---------  ---------- ---------- ----------
Adjusted income from continuing
 operations (1)                 $   4,170  $    3,854 $   20,013 $   17,282
                                =========  ========== ========== ==========

Weighted average diluted shares
 outstanding (2)                   18,755      18,915     19,085     19,121
                                =========  ========== ========== ==========

Adjusted income from continuing
 operations per share-diluted   $    0.22  $     0.21 $     1.05 $     0.90
                                =========  ========== ========== ==========

(1) During the fourth quarter of fiscal 2007, in connection with
    substantial volatility and reduction in liquidity in the global credit
    markets, the Company recorded several significant adjustments.  For
    comparability purposes, the Company is presenting adjusted income from
    continuing operations because it facilitates the evaluation of the
    Company without the effect of these adjustments.  Adjusted income from
    continuing operations should not be considered as an alternative to
    income from continuing operations (computed in accordance with GAAP).
    Instead, adjusted income from continuing operations should be reviewed
    in connection with income from continuing operations in the Company's
    consolidated financial statements, to help analyze how the Company's
    business is performing.
(2) Includes 1,273,000 diluted shares not used in the calculation of loss
    from continuing operations per share-diluted for the three months
    ended September 30, 2007.

This press release contains supplemental financial information determined by methods other than in accordance with Accounting Principles Generally Accepted in the United States of America ("GAAP"). The Company's management uses this non-GAAP measure in its analysis of the exclusion of certain adjustments recorded in the Company's fourth quarter of fiscal 2007. Management believes the presentation of this financial measure excluding the impact of these items provides useful supplemental information that is essential to a proper understanding of the financial results of the Company. This disclosure should not be viewed as a substitute for results determined in accordance with GAAP, nor is it necessarily comparable to non-GAAP performance measures that may be presented by other companies.

Schedule II

  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 $23.3 million for the fiscal year ended September 30, 2007, an increase of $1.3 million (6%) as compared to $22.0 million for the fiscal year ended September 30, 2006. The following reconciles net cash provided by continuing operations, as adjusted to net cash (used in) operating activities of continuing operations for the fiscal years ended September 30, 2007 and 2006, respectively (in thousands):

                                                       Fiscal Years Ended
                                                          September 30,
                                                      --------------------
                                                        2007       2006
                                                      ---------  ---------
Net cash (used in) operating activities of continuing
 operations                                           $ (49,826) $ (37,454)

Adjustments:
   Increase in commercial finance investments            67,210     68,376
   Changes in operating assets and liabilities           (5,790)   (14,074)
   Cash proceeds from the sale of a partial
    partnership interest and other investments           11,657      5,168
                                                      ---------  ---------
   Net cash provided by operating activities of
    continuing operations, as adjusted                $  23,251  $  22,016
                                                      =========  =========

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)