SOURCE: Resource America, Inc.

Resource America, Inc.

May 04, 2011 20:15 ET

Resource America, Inc. Reports Operating Results for the Second Fiscal Quarter Ended March 31, 2011

PHILADELPHIA, PA--(Marketwire - May 4, 2011) - Resource America, Inc. (NASDAQ: REXI) (the "Company") reported an adjusted loss from continuing operations attributable to common shareholders, a non-GAAP measure, of $675,000, or $0.03 per common share-diluted, and $1.0 million, or $0.05 per common share-diluted, for the second fiscal quarter and six months ended March 31, 2011, respectively, as compared to an adjusted loss from continuing operations attributable to common shareholders of $880,000, or $0.05 per common share-diluted, and $752,000, or $0.04 per common share-diluted, for the second fiscal quarter and six months ended March 31, 2010, respectively. A reconciliation of the Company's reported GAAP loss from continuing operations attributable to common shareholders to adjusted loss from continuing operations attributable to common shareholders, a non-GAAP measure, is included as Schedule I to this release.

For the second fiscal quarter and six months ended March 31, 2011, the Company reported a GAAP net loss attributable to common shareholders of $4.3 million, or $0.22 per common share-diluted, and $4.8 million, or $0.25 per common share-diluted, respectively, as compared to $1.2 million, or $0.06 per common share-diluted, and $261,000, or $0.01 per common share-diluted, for the second fiscal quarter and six months ended March 31, 2010, respectively. Included in GAAP net loss attributable to common shareholders for the second fiscal quarter and six months ended March 31, 2011 was a $2.2 million charge, net of tax, to discontinued operations related to a previously sold real estate asset.

Jonathan Cohen, CEO and President, commented, "During our second quarter ended March 31, 2011, the Company continues to make progress and has now begun to grow again. Assets under management increased over $600 million from a year ago and revenues increased substantially from last quarter, and growth prospects appear to have been revived in REIT and CLO offerings which have been a key driver to our company's asset growth. Our balance sheet is in good shape with approximately $16.5 million in cash and after the closing of our non-core real estate sale in June (under contract now) we expect to book a gain of $8.5 million and take in approximately $17 million of additional cash after taxes."

Assets Under Management

The following table details the Company's assets under management by operating segment, which increased by $607.6 million (5%) from March 31, 2010 to March 31, 2011:

                                         At March 31,       At March 31,
                                             2011               2010
                                       -----------------  -----------------
Financial fund management              $   11.4  billion  $   10.3  billion
Real estate                                 1.6  billion       1.7  billion
Commercial finance                          0.7  billion       1.1  billion
                                       -----------------  -----------------
                                       $   13.7  billion  $   13.1  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 March 31, 2011, the Company's book value per common share was $6.69 per share. Total stockholders' equity was $127.1 million as of March 31, 2011 as compared to $144.9 million as of March 31, 2010. Total common shares outstanding were 18,986,783 as of March 31, 2011 as compared to 18,223,993 as of March 31, 2010.

Highlights for the Second Fiscal Quarter Ended March 31, 2011 and Recent Developments

REAL ESTATE:

--  Fundraising: Resource Real Estate, Inc. ("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 non-traded real estate program. Through April 29,
    2011, RRE Opportunity REIT has raised approximately $40.2 million and
    made the acquisition described below during the second fiscal quarter
    ended March 31, 2011.
--  Acquisition: In March 2011, RRE purchased a $3.1 million portfolio
    consisting of four loans on behalf of RRE Opportunity REIT, each of
    which is secured by a first priority mortgage on a multifamily
    residential apartment community. In connection with this purchase, the
    Company received a $64,000 acquisition fee and will receive management
    fees and debt servicing fees on two of the loans in the future.
--  Resolution of Equity Interest: In March 2011, RRE, along with an
    existing joint venture partner, sold its interest in an apartment
    building in Lafayette, IN and received proceeds of $282,000.
--  Property Management: Resource Real Estate Management, Inc., the
    Company's property management subsidiary, increased the apartment units
    it manages to 14,913 units at 52 properties as of March 31, 2011 from
    14,456 units at 54 properties as of March 31, 2010.

FINANCIAL FUND MANAGEMENT:

--  CLO Award Nomination: Apidos Capital Management, LLC ("Apidos"), the
    Company's leveraged loan manager, has been selected as a finalist for
    several Creditflux CLO manager awards. Apidos is a finalist in the
    categories of Best 2007 US CLO, Best 2006 US CLO and Best 2005 US CLO.
    It is the only finalist that has been nominated in all three of these
    categories. Apidos has also been nominated for Best US CLO manager.
--  New Management Agreement: In February 2011, in connection with the
    acquisition by Resource Capital Corp. ("RSO") of Churchill Pacific
    Asset Management LLC, which was renamed Resource Capital Asset
    Management, LLC ("RCAM"), Apidos was appointed sub-advisor and agent to
    advise RCAM in connection with its collateral management and collateral
    administration duties under five collateral management agreements. In
    connection with the services provided, Apidos will receive 10% of all
    base and additional collateral management fees and 50% of incentive
    management fees collected by RCAM.

COMMERCIAL FINANCE:

--  In January 2011, LEAF Financial Corporation ("LEAF"), the Company's
    commercial finance operating segment, 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. ("RSO") and Guggenheim Securities, LLC
    ("Guggenheim"). RSO 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.
--  Lease Origination/Platform Expansion: LEAF Commercial continues to
    focus its origination efforts to better serve its equipment vendor
    customers, support its independent equipment dealers and enhance its
    manufacturer branch networks through its full service processing center
    in Moberly, MO. In addition, through its Philadelphia, PA processing
    center, LEAF Commercial will support the captive finance arms of its
    manufacturer clients, as well as bank outsourcing and direct marketing
    to end users in select vertical markets.
--  Increased Key Metrics: As a result of the capital raise announced in
    January 2011 and the refocusing of resources on the expansion of the
    platform, our commercial finance operation has shown significant
    increases in key business metrics for the second fiscal quarter ended
    March 31, 2011 as compared to the first fiscal quarter ended
    December 31, 2010:
    --  Credit Applications - up 31%
    --  Lease Originations - up 73%
    --  Approved Backlog - up 79%
--  Expanded Credit: In April 2011, Wells Fargo Lender Finance ("Wells")
    joined as a participant in LEAF Commercial's revolving senior debt
    facility arranged and managed by Guggenheim. This additional $60
    million commitment from Wells will be used by LEAF Commercial to fund
    new lease 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.

CORPORATE/OTHER:

--  RSO Public Offering: RSO, a real estate investment trust for which the
    Company is the external manager and a shareholder, completed a public
    common stock follow-on offering of 6.9 million shares of its common
    stock at a price of $6.90 per share and received net proceeds, after
    underwriting discounts and expenses, of $46.6 million. The Company is
    paid a base management fee of 1.5% based on RSO's equity.
--  New Credit Facility: In February 2011, the Company entered into a new
    $3.5 million secured line of credit with Republic First Bank
    ("Republic"). The Republic facility bears interest at a rate of prime
    plus 100 basis points with a floor of 4.5% and matures on September 28,
    2012.
--  Amended Credit Facility: In March 2011, the Company entered into an
    amendment with TD Bank with respect to its corporate credit facility.
    In connection with this amendment, the following material changes were
    made:
    --  Maximum facility amount was increased from $12.9 million to $14.5
        million, consisting of a $5.0 million term loan and a $9.5 million
        revolving loan component;
    --  Maturity date was extended to August 31, 2012 from October 15,
        2011;
    --  Reduced applicable base rate interest rate spread to 225 basis
        points over the prime rate (with a 6% floor) from 300 basis points
        over the prime rate (with a 7.00% floor);
    --  Reduced applicable LIBOR interest rate spread to 300 basis points
        over the prime rate (with a 6% floor) from 450 basis points over
        the prime rate (with a 7.50% floor); and
    --  Modification to apply asset sale prepayments to only reduce the
        term loan.
--  Dividends: The Company's Board of Directors authorized the payment on
    April 29, 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
    April 19, 2011. RSO declared a cash dividend of $0.25 per common
    share for its first quarter ended March 31, 2011.

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., 2005 Market Street, 15th Floor, Philadelphia, PA 19102.

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 loss from continuing operations attributable to common shareholders to adjusted loss from continuing operations attributable to common shareholders.



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

                                             March 31,      September 30,
                                                2011             2010
                                          ---------------  ---------------
                                            (unaudited)
ASSETS
  Cash                                    $        16,495  $        11,243
  Restricted cash                                  21,446           12,018
  Receivables                                       1,138            1,671
  Receivables from managed entities and
   related parties, net                            59,498           66,416
  Investments in commercial finance, net          145,961           12,176
  Investments in real estate, net                  27,547           27,114
  Investment securities, at fair value             19,469           22,358
  Investments in unconsolidated entities           12,861           13,825
  Property and equipment, net                       8,312            9,984
  Deferred tax assets                              46,114           43,703
  Goodwill                                          7,969            7,969
  Other assets                                      7,594            5,776
                                          ---------------  ---------------
    Total assets                          $       374,404  $       234,253
                                          ===============  ===============

LIABILITIES AND EQUITY
Liabilities:
  Accrued expenses and other liabilities  $        34,409  $        38,492
  Payables to managed entities and
   related parties                                    297              156
  Borrowings                                      180,643           66,110
  Deferred tax liabilities                            411              411
                                          ---------------  ---------------
    Total liabilities                             215,760          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;
   28,740,931 and 28,167,909 shares
   issued, respectively (including
   nonvested restricted stock of 645,708
   and 741,086, respectively)                         281              274
  Additional paid-in capital                      280,906          281,378
  Accumulated deficit                             (43,496)         (37,558)
  Treasury stock, at cost; 9,108,440 and
   9,125,253 shares, respectively                 (99,085)         (99,330)
  Accumulated other comprehensive loss            (11,504)         (12,807)
                                          ---------------  ---------------
    Total stockholders' equity                    127,102          131,957
  Noncontrolling interests                         31,542           (2,873)
                                          ---------------  ---------------
    Total equity                                  158,644          129,084
                                          ---------------  ---------------
                                          $       374,404  $       234,253
                                          ===============  ===============



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


                                    Three Months Ended   Six Months Ended
                                        March 31,           March 31,
                                    ------------------  ------------------
                                      2011      2010      2011      2010
                                    --------  --------  --------  --------
REVENUES:
Real estate                         $  6,258  $  5,770  $ 13,132  $ 12,717
Commercial finance                     6,477     7,409     7,953    16,232
Financial fund management              7,612     6,221    15,942    15,873
                                    --------  --------  --------  --------
                                      20,347    19,400    37,027    44,822
                                    --------  --------  --------  --------
COSTS AND EXPENSES:
Real estate                            6,088     5,516    11,549    10,243
Commercial finance                     3,693     4,731     7,966     9,306
Financial fund management              5,960     4,700    12,680     9,404
General and administrative             2,897     2,768     6,013     6,200
(Gain) loss on sale of leases and
 loans                                  (252)      (31)     (263)      551
Provision for credit losses            2,719     1,210     4,325     1,986
Depreciation and amortization          2,921     2,382     4,046     4,588
                                    --------  --------  --------  --------
                                      24,026    21,276    46,316    42,278
                                    --------  --------  --------  --------
OPERATING (LOSS) INCOME               (3,679)   (1,876)   (9,289)    2,544
                                    --------  --------  --------  --------

OTHER INCOME (EXPENSE):
Total other-than-temporary impairment
 losses on investment securities           -      (297)        -      (297)
Portion recognized in other
 comprehensive loss                        -         -         -         -
                                    --------  --------  --------  --------
Net other-than-temporary impairment
 losses recognized in earnings             -      (297)        -      (297)
Gain on sale of management contract        -         -     6,520         -
Gain on extinguishment of servicing
 and repurchase liabilities            4,426         -     4,426         -
Gain (loss) on sale of investment
 securities, net                          97      (424)   (1,364)     (424)
Interest expense                      (4,167)   (3,871)   (6,536)   (7,688)
Other income, net                        203       637     1,289     1,207
                                    --------  --------  --------  --------
                                         559    (3,955)    4,335    (7,202)
                                    --------  --------  --------  --------
Loss from continuing operations
 before taxes                         (3,120)   (5,831)   (4,954)   (4,658)
Income tax benefit                    (1,290)   (3,986)   (1,932)   (3,401)
                                    --------  --------  --------  --------
Loss from continuing operations       (1,830)   (1,845)   (3,022)   (1,257)
Loss from discontinued operations,
 net of tax                           (2,153)       (2)   (2,153)       (2)
                                    --------  --------  --------  --------
Net loss                              (3,983)   (1,847)   (5,175)   (1,259)
Add: net (income) loss attributable
 to noncontrolling interests            (283)      615       342       998
                                    --------  --------  --------  --------
Net loss attributable to common
 shareholders                       $ (4,266) $ (1,232) $ (4,833) $   (261)
                                    ========  ========  ========  ========
Amounts attributable to common
 shareholders:
Loss from continuing operations,
 net of tax                         $ (2,113) $ (1,230) $ (2,680) $   (259)
Discontinued operations, net of tax   (2,153)       (2)   (2,153)       (2)
                                    --------  --------  --------  --------
Net loss                            $ (4,266) $ (1,232) $ (4,833) $   (261)
                                    ========  ========  ========  ========
Basic loss per share:
Continuing operations               $  (0.11) $  (0.06) $  (0.14) $  (0.01)
Discontinued operations                (0.11)        -     (0.11)        -
                                    --------  --------  --------  --------
Net loss                            $  (0.22) $  (0.06) $  (0.25) $  (0.01)
                                    ========  ========  ========  ========
Weighted average shares outstanding   19,355    19,089    19,213    18,888
                                    ========  ========  ========  ========
Diluted loss per share:
Continuing operations               $  (0.11) $  (0.06) $  (0.14) $  (0.01)
Discontinued operations                (0.11)        -     (0.11)        -
                                    --------  --------  --------  --------
Net loss                            $  (0.22) $  (0.06) $  (0.25) $  (0.01)
                                    ========  ========  ========  ========
Weighted average shares outstanding   19,355    19,089    19,213    18,888
                                    ========  ========  ========  ========
Dividends declared per common share $   0.03  $   0.03  $   0.06  $   0.06
                                    ========  ========  ========  ========



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

                                                         Six Months Ended
                                                             March 31,
                                                        ------------------
                                                          2011      2010
                                                        --------  --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss                                                $ (5,175) $ (1,259)
Adjustments to reconcile net loss to net cash (used in)
 provided by operating activities:
  Depreciation and amortization                            6,243     6,721
  Net other-than-temporary impairment losses recognized
   in earnings                                                 -       297
  Provision for credit losses                              4,325     1,986
  Equity in earnings of unconsolidated entities           (1,944)   (3,441)
  Distributions from unconsolidated entities               2,751     2,701
  (Gain) loss on sale of leases and loans                   (263)      551
  Loss on sale of investment securities, net               1,364       424
  Gain on resolution of assets                                 -      (287)
  Gain on sale of management contract                     (6,520)        -
  Extinguishment of servicing and repurchase liabilities  (4,426)        -
  Deferred income tax (benefit) provision                 (3,065)       33
  Equity-based compensation issued                         1,401     2,014
  Equity-based compensation received                         (33)     (375)
Decrease in commercial finance investments                     -    37,182
Loss from discontinued operations                          2,153         2
Changes in operating assets and liabilities               (1,047)  (19,657)
                                                        --------  --------
Net cash (used in) provided by operating activities       (4,236)   26,892
                                                        --------  --------

CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures                                        (411)     (236)
Payments received on real estate loans and real estate         -     2,885
Investments in unconsolidated real estate entities          (419)   (1,512)
Purchase of commercial finance assets                    (25,790)        -
Proceeds from sale of management contract                  9,095         -
Purchase of loans and investments                              -    (1,011)
Proceeds from sale of loans and investments                3,341     1,510
Principal payments received on loans                           -       333
                                                        --------  --------
Net cash (used in) provided by investing activities      (14,184)    1,969
                                                        --------  --------

CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in borrowings                                    31,000    71,001
Principal payments on borrowings                         (13,756) (116,525)
Dividends paid                                            (1,105)   (1,088)
Proceeds from issuance of common stock                     1,853        58
Proceeds from issuance of subsidiary preferred stock      10,221         -
Increase in debt financing costs                          (1,075)   (1,374)
(Decrease) increase in restricted cash                    (3,518)      194
                                                        --------  --------
Net cash provided by (used in) financing activities       23,620   (47,734)
                                                        --------  --------

CASH FLOWS FROM DISCONTINUED OPERATIONS
Operating                                                     52         -
                                                        --------  --------
Net cash provided by discontinued operations                  52         -
                                                        --------  --------

Increase (decrease) in cash                                5,252   (18,873)
Cash at beginning of year                                 11,243    26,197
                                                        --------  --------
Cash at end of period                                   $ 16,495  $  7,324
                                                        ========  ========



SCHEDULE I


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


                                    Three Months Ended   Six Months Ended
                                        March 31,           March 31,
                                    ------------------  ------------------
                                      2011      2010      2011      2010
                                    --------  --------  --------  --------
Loss from continuing operations
 attributable to common
 shareholders - GAAP                $ (2,113) $ (1,230) $ (2,680) $   (259)

Adjustments, net of tax:
  Loss from commercial finance
   operations (2)                        395       786     2,689       791
  Relocation charges                     339         -       305         -
  Partnership level adjustments          163       234       124      (968)
  Non-cash amortization of warrants      271       192       472       354
  Gain on trading securities/foreign
   exchange translation adjustments      (45)        -      (236)        -
  Deferred tax assets                     24    (1,303)      446    (1,212)
  Impairment/loss on sale of
   investment securities                   -       160       764       157
  Gain on sale of management contract      -         -    (3,391)        -
  Other                                  291       281       493       385
                                    --------  --------  --------  --------
Adjusted loss from continuing
 operations attributable to 
 common shareholders                $   (675) $   (880) $ (1,014) $   (752)
                                    ========  ========  ========  ========

Weighted average diluted shares
 outstanding                          19,355    19,089    19,213    18,888
                                    ========  ========  ========  ========

Adjusted loss from continuing
 operations attributable to
 common shareholders per common
 share-diluted                      $  (0.03) $  (0.05) $  (0.05) $  (0.04)
                                    ========  ========  ========  ========


(1) For comparability purposes, the Company is presenting adjusted loss
    from continuing operations attributable to common shareholders because
    it facilitates the evaluation of the Company's underlying operating
    performance without the effect of adjustments that do not directly
    relate to that performance. Adjusted loss from continuing operations
    attributable to common shareholders should not be considered as an
    alternative to loss from continuing operations attributable to common
    shareholders (computed in accordance with GAAP). Instead, adjusted
    loss from continuing operations attributable to common shareholders
    should be reviewed in connection with loss from continuing operations
    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, gain on extinguishment of
    servicing and repurchase liabilities, provision for credit losses and
    depreciation and amortization) net of applicable tax benefits and
    noncontrolling interests.

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)