SOURCE: Resource America, Inc.

May 01, 2007 18:01 ET

Resource America, Inc. Reports Operating Results for Second Fiscal Quarter Ended March 31, 2007

PHILADELPHIA, PA -- (MARKET WIRE) -- May 1, 2007 -- Resource America, Inc. (NASDAQ: REXI) (the "Company") reported second fiscal quarter ended March 31, 2007 revenues of $31.6 million, operating income of $15.0 million, income from continuing operations before income taxes of $8.4 million, and income from continuing operations and net income of $5.4 million, or $0.29 per common share-diluted.

Assets under management increased to $14.7 billion at March 31, 2007 from $9.5 billion at March 31, 2006, an increase of $5.2 billion (54%). As of April 30, 2007, the Company's assets under management had increased to $15.0 billion.

The following table details assets under management by operating segment:


                                           At March 31,
                             ---------------------------------------------
                                     2007                     2006
                             -------------------      --------------------
Financial fund management    $    12.7   billion (1)  $        8.4 billion
Real estate                        1.3   billion (1)           0.6 billion
Commercial finance                 0.7   billion               0.5 billion
                             -------------------      --------------------
                             $    14.7   billion      $        9.5 billion
                             ===================      ====================


(1) Includes assets under management of $2.0 billion at March 31, 2007 on
    warehouse facilities for which the Company has been engaged as the
    collateral manager for CDOs not yet closed.
For the second fiscal quarter ended March 31, 2006, the Company had revenues of $20.5 million, operating income of $8.4 million, income from continuing operations before income taxes and cumulative effect of a change in accounting principle of $8.7 million, income from continuing operations before cumulative effect of a change in accounting principle of $4.9 million, or $0.26 per common share-diluted, and net income of $5.1 million, or $0.27 per common share-diluted.

Operating income as adjusted, before depreciation and amortization, was $15.7 million and $25.7 million for the second fiscal quarter and six months ended March 31, 2007, as compared to $9.3 million and $15.8 million for the second fiscal quarter and six months ended March 31, 2006, an increase of $6.4 million and $9.9 million, respectively. The following reconciles operating income as adjusted to operating income (in thousands):

                                 Three Months Ended     Six Months Ended
                                      March 31,             March 31,
                                --------------------- ---------------------
                                  2007       2006       2007       2006
                                ---------- ---------- ---------- ----------
Operating income                $   14,973 $    8,433 $   24,274 $   14,102
Plus:
  Depreciation and amortization        719        836      1,428      1,674
                                ---------- ---------- ---------- ----------
    Operating income as
     adjusted                   $   15,692 $    9,269 $   25,702 $   15,776
                                ========== ========== ========== ==========
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 Annual Report on 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 Second Fiscal Quarter Ended March 31, 2007 and Recent Developments

CORPORATE:

--  The Company increased its book value per share to $11.49 at March 31,
    2007 from $11.17 at September 30, 2006.
    
--  Resource Capital Corp. ("RCC"), a real estate investment trust managed
    by the Company and in which the Company owns approximately 1.9 million
    common shares, declared a cash dividend of $0.39 per common share for the
    quarter ended March 31, 2007.
    
--  The Company's Board of Directors 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.
    
FINANCIAL FUND MANAGEMENT:
--  The Company's financial fund management operating segment increased
    its assets under management at March 31, 2007 to $12.7 billion, an increase
    of $4.3 billion (51%) from March 31, 2006.
    
--  During the period from January 2007 through April 30, 2007, the
    Company closed or priced four CDO transactions that will finance a total of
    $1.7 billion of assets. The Company closed Trapeza CDO XII, Ltd. and Apidos
    CDO V financing a total of $918.0 million of trust preferred securities and
    bank loans. In addition, the Company priced Resource Europe CLO I B.V., its
    first European collateralized loan obligation ("CLO"), financing EUR 300.0
    million of predominately western European secured leveraged loans and
    Apidos Cinco CDO a $350.0 million transaction that will be managed by
    Apidos on behalf of RCC.
    
--  Financial fund management revenues increased by $10.2 million (176%)
    to $16.0 million for the second fiscal quarter ended March 31, 2007 from
    $5.8 million for the second fiscal quarter ended March 31, 2006.
    
--  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 $2.5 billion at March 31, 2007 from
    $829.0 million at March 31, 2006.
    
--  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
    March 31, 2007 from $4.0 billion at March 31, 2006.
    
--  Trapeza Capital Management ("Trapeza"), the Company's joint venture
    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 $4.7 billion at March 31, 2007 from $3.5 billion at March
    31, 2006.
    
--  Resource Europe Management ("Resource Europe"), the Company's European
    bank loan asset manager, increased its managed assets to $403.0 million at
    March 31, 2007 from $91.3 million at September 30, 2006. Resource Europe
    began acquiring loans during the quarter ended September 30, 2006.
    
--  In March 2007, the Company formed Coredo Capital Management, LLC to
    focus on originating, structuring and managing trust preferred securities
    of real estate investment trusts ("REITs") and real estate operating
    companies ("REOCs").
    
REAL ESTATE:
--  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 operates the Company's commercial
    real estate debt platform, increased its assets under management to $1.3
    billion at March 31, 2007, an increase of $614.0 million (96%) from March
    31, 2006.
    
--  RRE acquired two properties during the three months ended March 31,
    2007, with an aggregate purchase price of $15.7 million.
    
COMMERCIAL FINANCE:
--  LEAF Financial Corporation ("LEAF"), the Company's commercial finance
    asset manager, increased its commercial finance originations to $129.9
    million for the second fiscal quarter ended March 31, 2007, an increase of
    $36.3 million (39%) from the second fiscal quarter ended March 31, 2006.
    
--  Commercial finance assets under management increased to $737.0 million
    at March 31, 2007, an increase of $267.0 million (57%) from March 31, 2006.
    
--  Commercial finance revenues increased to $8.6 million for the second
    fiscal quarter ended March 31, 2007 from $5.5 million (55%) for the second
    fiscal quarter ended March 31, 2006.
    
--  LEAF launched Merit Capital Advance, a new line of business to provide
    capital to small businesses by advancing cash against future credit card
    receipts.
    
--  LEAF commenced its $120.0 million offering of LEAF Equipment Leasing
    Income Fund III, its third publicly offered commercial finance fund. As of
    April 30, 2007, LEAF has raised $19.5 million for LEAF III.
    
--  Robert J. Hunter was hired by LEAF as its Executive Vice President and
    Chief Marketing Officer in February, 2007. Mr. Hunter has over 20 years
    experience in the leasing business. Prior to joining LEAF, Mr. Hunter was
    the SVP of Business Development and Marketing with Citicorp Vendor Finance,
    the equipment leasing and finance business unit of Citigroup.
    
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 unaudited consolidated balance sheets, consolidated statements of income, consolidated statements of cash flows 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)


                                                March 31,    September 30,
                                                  2007           2006
                                              -------------  -------------
                                               (unaudited)
           ASSETS
  Cash                                        $      18,199  $      37,622
  Restricted cash                                    17,072          8,103
  Receivables                                        33,839          2,312
  Receivables from managed entities                  14,132          8,795
  Investments in commercial finance                 200,908        108,850
  Loans held for investment                         495,275         69,314
  Investments in real estate                         49,505         50,104
  Investment securities available-for-sale           66,721         64,857
  Investments in unconsolidated entities             32,383         26,626
  Property and equipment, net                         9,918          9,525
  Deferred income taxes                               8,470          6,408
  Other assets                                       32,130         24,237
                                              -------------  -------------
    Total assets                              $     978,552  $     416,753
                                              =============  =============

        LIABILITIES AND STOCKHOLDERS' EQUITY
  Accounts payable, accrued expenses and
   other liabilities                          $      65,955  $      29,526
  Payables to managed entities                          875          1,579
  Borrowings                                        692,441        172,238
  Deferred income tax liabilities                     8,207         10,746
  Minority interests                                  8,782          9,602
                                              -------------  -------------
    Total liabilities                               776,260        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; 26,702,748 and
   26,401,708 shares issued, respectively               267            264
  Additional paid-in capital                        263,848        259,882
  Retained earnings                                  33,009         25,464
  Treasury stock, at cost; 9,095,244 and
   9,110,290 shares, respectively                   (96,799)       (96,960)
  ESOP loan receivable                                 (453)          (465)
  Accumulated other comprehensive income              2,420          4,877
                                              -------------  -------------
    Total stockholders' equity                      202,292        193,062
                                              -------------  -------------
                                              $     978,552  $     416,753
                                              =============  =============



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


                                 Three Months Ended     Six Months Ended
                                      March 31,             March 31,
                                --------------------  --------------------
                                  2007       2006       2007       2006
                                ---------  ---------  ---------  ---------
REVENUES
Financial fund management       $  16,030  $   5,814  $  28,417  $  13,293
Real estate                         7,008      9,206     11,572     13,860
Commercial finance                  8,564      5,517     15,653     10,598
                                ---------  ---------  ---------  ---------
                                   31,602     20,537     55,642     37,751

COSTS AND EXPENSES
Financial fund management           5,401      2,765      9,953      5,064
Real estate                         3,195      2,714      6,208      4,979
Commercial finance                  4,560      3,553      8,191      6,471
General and administrative          2,754      2,236      5,588      5,461
Depreciation and amortization         719        836      1,428      1,674
                                ---------  ---------  ---------  ---------
                                   16,629     12,104     31,368     23,649
                                ---------  ---------  ---------  ---------
OPERATING INCOME                   14,973      8,433     24,274     14,102

OTHER INCOME (EXPENSE)
Interest expense                   (7,694)    (1,369)   (12,285)    (3,665)
Minority interests                   (715)      (369)    (1,275)      (771)
Other income, net                   1,811      1,962      4,339      2,835
                                ---------  ---------  ---------  ---------
                                   (6,598)       224     (9,221)    (1,601)
                                ---------  ---------  ---------  ---------
Income from continuing
 operations before income taxes
 and cumulative effect of a
 change in accounting principle     8,375      8,657     15,053     12,501
Provision for income taxes          2,955      3,723      5,165      2,186
                                ---------  ---------  ---------  ---------
Income from continuing
 operations before cumulative
 effect of a change in
 accounting principle               5,420      4,934      9,888     10,315
(Loss) income from discontinued
 operations, net of tax               (37)       152        (56)     1,090
Cumulative effect of a change
 in accounting principle, net
 of tax                                 -          -          -      1,357
                                ---------  ---------  ---------  ---------
Net income                      $   5,383  $   5,086  $   9,832  $  12,762
                                =========  =========  =========  =========

Basic earnings per common
 share:
Continuing operations           $    0.31  $    0.28  $    0.57  $    0.57
Discontinued operations                 -       0.01          -       0.06
Cumulative effect of accounting
 change                                 -          -          -       0.08
                                ---------  ---------  ---------  ---------
Net income                      $    0.31  $    0.29  $    0.57  $    0.71
                                =========  =========  =========  =========
Weighted average shares
 outstanding                       17,242     17,606     17,267     17,822
                                =========  =========  =========  =========

Diluted earnings per common
 share:
Continuing operations           $    0.29  $    0.26  $    0.52  $    0.53
Discontinued operations                 -       0.01          -       0.06
Cumulative effect of accounting
 change                                 -          -          -       0.07
                                ---------  ---------  ---------  ---------
Net income                      $    0.29  $    0.27  $    0.52  $    0.66
                                =========  =========  =========  =========
Weighted average shares
 outstanding                       19,027     19,069     19,074     19,232
                                =========  =========  =========  =========

Dividends declared per common
 share                          $    0.07  $    0.06  $    0.13  $    0.12
                                =========  =========  =========  =========



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

                                                      Six Months Ended
                                                          March 31,
                                                  ------------------------
                                                      2007         2006
                                                  -----------  -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                        $     9,832  $    12,762
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                         1,721        1,674
  Equity in earnings of unconsolidated entities        (7,926)      (4,287)
  Minority interests                                    1,275          771
  Distributions from unconsolidated entities            7,852        6,038
  Loss (income) from discontinued operations               56       (1,090)
  Gain on sale of assets                               (5,307)      (6,016)
  Deferred income tax (benefit) provision              (4,023)       1,154
  Non-cash compensation on long-term incentive
   plans                                                1,316          724
  Non-cash compensation issued                            139          531
  Non-cash compensation received                         (361)      (1,222)
Increase in commercial finance investments            (92,246)     (12,415)
Changes in operating assets and liabilities            (5,222)      (5,354)
                                                  -----------  -----------
Net cash used in operating activities of
 continuing operations                                (92,894)      (8,087)
                                                  -----------  -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures                                   (1,494)      (1,550)
Payments received on real estate loans and real
 estate                                                 8,401       20,434
Investments in real estate                            (10,163)     (25,302)
Purchase of investments                                (9,881)     (28,575)
Proceeds from sale of investments                       4,694        5,415
(Increase) decrease in restricted cash                 (8,969)       5,000
(Increase) decrease in other assets                    (1,775)         191
                                                  -----------  -----------
Net cash used in investing activities of
 continuing operations                                (19,187)     (24,387)
                                                  -----------  -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in borrowings                                356,944      260,204
Principal payments on borrowings                     (262,651)    (237,928)
Dividends paid                                         (2,287)      (2,145)
Distributions paid to minority interest holders          (968)        (783)
Proceeds from issuance of stock                           927           79
Purchase of treasury stock                                  -       (8,350)
Tax benefit from the exercise of stock options          1,887            -
                                                  -----------  -----------
Net cash provided by financing activities of
 continuing operations                                 93,852       11,077
                                                  -----------  -----------
Net cash retained by entities previously
 consolidated                                               -       (3,825)
                                                  -----------  -----------

CASH FLOWS FROM DISCONTINUED OPERATIONS:
Operating activities                                      (49)       8,828
Investing activities                                        -       27,124
Financing activities                                   (1,145)           -
                                                  -----------  -----------
Net cash (used in) provided by discontinued
 operations                                            (1,194)      35,952
                                                  -----------  -----------
(Decrease) increase in cash                           (19,423)      10,730
Cash at beginning of period                            37,622       30,353
                                                  -----------  -----------
Cash at end of period                             $    18,199  $    41,083
                                                  ===========  ===========
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 $10.8 million for the six months ended March 31, 2007 as compared to $13.7 million for the six months ended March 31, 2006. The following reconciles net cash provided by operating activities of continuing operations as adjusted to net cash used in operating activities of continuing operations (in thousands):

                                                        Six Months Ended
                                                            March 31,
                                                      --------------------
                                                        2007       2006
                                                      ---------  ---------
Net cash used in operating activities of continuing
 operations                                           $ (92,894) $  (8,087)

Adjustments:
  Increase in commercial finance investments             92,246     12,415
  Changes in operating assets and liabilities             5,222      5,354
  Proceeds from sale of a partial partnership
   interest and an investment                             6,268      4,000
                                                      ---------  ---------
    Net cash provided by operating activities of
     continuing operations, as adjusted               $  10,842  $  13,682
                                                      =========  =========

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)