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)