SOURCE: Resource America, Inc.

Resource America, Inc.

November 18, 2013 17:00 ET

Resource America, Inc. Reports Operating Results for the Third Quarter Ended September 30, 2013

PHILADELPHIA, PA--(Marketwired - Nov 18, 2013) -  Resource America, Inc. (NASDAQ: REXI) (the "Company") reported GAAP net income attributable to common shareholders of $3.4 million, or $0.16 per common share-diluted, and $5.1 million, or $0.23 per common share-diluted, for the three and nine months ended September 30, 2013, respectively, as compared to a GAAP net loss attributable to common shareholders of $2.3 million, or $0.11 per common share-diluted, and net income attributable to common shareholders of $25.6 million, or $1.23 per common share-diluted, for the three and nine months ended September 30, 2012, respectively. Included in GAAP net income (loss) attributable to common shareholders for the nine months ended September 30, 2012, was a $32.7 million gain, net of tax, on the sale of the Company's credit loan manager.

The Company reported adjusted net income attributable to common shareholders, a non-GAAP measure, of $5.1 million, or $0.23 per common share-diluted, and $10.4 million, or $0.48 per common share-diluted, for the three and nine months ended September 30, 2013, respectively, as compared to adjusted net income attributable to common shareholders of $3.1 million, or $0.15 per common share-diluted, and $103,000, or $0.00 per common share-diluted, for the three and nine months ended September 30, 2012, respectively. A reconciliation of the Company's reported GAAP net income (loss) attributable to common shareholders to adjusted net income attributable to common shareholders, a non-GAAP measure, is included as Schedule I to this release. 

Assets Under Management

The following table details the Company's assets under management by operating segment, which increased by $1.5 billion (10%) from September 30, 2012 to September 30, 2013 (in billions):

     
    September 30,
    2013   2012
Financial fund management   $ 13.8   $ 12.7
Real estate     2.1     1.7
Commercial finance     0.6     0.6
    $ 16.5   $ 15.0
             

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 year ended September 30, 2012.

Highlights for the Third Quarter Ended September 30, 2013 and Recent Developments

REAL ESTATE ASSET MANAGEMENT:
Equity Asset Management
Resource Real Estate Opportunity REIT, Inc, a public non-traded REIT managed by the Company, which specializes in acquiring and managing distressed real estate assets, had the following highlights:

  • Raised a record $101.5 million during the three months ended September 30, 2013 and a record $58.3 million for the month ended October 31, 2013.
  • Increased total assets to $382.6 million at September 30, 2013, an increase of $234.0 million, or 157%, from September 30, 2012, reflecting the acquisition during the three months ended September 30, 2013 of four multifamily rental apartment properties totaling $105.3 million located in Plano, TX, Newport News, VA and Denver, CO.
  • In July 2013, entered into an agreement to acquire 11 multifamily assets totaling 2,513 units and two office properties that contain 75,518 rentable square feet for $52.7 million.
  • In October 2013, acquired a 437-unit multifamily rental apartment in Alpharetta, GA for $26.3 million.

Debt Asset Management
Resource Capital Corp. ("RSO"), a publicly traded REIT managed by the Company which focuses on commercial real estate assets, had the following highlights:

  • Originated $94.2 million of commercial real estate whole loans during the quarter.
  • In July 2013, closed a $200.0 million commercial real estate credit facility with Deutsche Bank AG.
  • In October 2013, closed a $115.0 million public offering of 6.00% convertible senior notes due 2018.

The following additional highlights contributed to our real estate asset management operations:

  • Resource Real Estate Management, Inc., the Company's property management subsidiary, increased the apartment units it manages to 18,737 units (at 65 properties) as of September 30, 2013 from 17,979 units (at 61 properties) as of September 30, 2012.
  • The Company's real estate operating segment increased its assets under management at September 30, 2013 to $2.1 billion, an increase of $406.0 million, or 24%, from September 30, 2012.
  • Real estate revenues increased 42% and 24%, to $16.0 million and $39.4 million, for the three and nine months ended September 30, 2013, respectively, as compared to $11.3 million and $31.9 million for the three and nine months ended September 30, 2012, respectively. 

FINANCIAL FUND MANAGEMENT:
Credit Asset Management
CVC Credit Partners, L.P. ("CCP"), the Company's global joint venture with CVC Capital Partners ("CVC"), closed Apidos CLO XIV (par value $617.0 million) and Apidos CLO XV (par value $500.0 million) in July and October 2013, respectively. In connection with these Collateralized Loan Obligation issuers, CCP expects to receive approximately $4.9 million annually in asset management fees in the future.

The following additional highlight contributed to our financial fund asset management operations:
The Company's financial fund management operating segment increased its assets under management at September 30, 2013 to $13.8 billion, an increase of $1.1 billion, or 9%, from September 30, 2012.

CORPORATE/OTHER:
Share Repurchase

  • In August 2013, the Company repurchased 205,627 shares at $7.53 per share. Since August 2012, the Company has repurchased over 588,000 shares at an average price of $6.88 under its share repurchase plan.

Dividends

  • The Company's Board of Directors authorized an increase in the Company's cash dividend from $0.03 to $0.04 per share on the Company's common stock and payment on October 31, 2013 to holders of record as of the close of business on October 18, 2013. 
  • RSO's Board of Directors declared a cash dividend of $0.20 per common share for its three months ended September 30, 2013.

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, financial fund management and commercial finance sectors as well as our joint ventures.

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 Resource Securities, Inc., 1845 Walnut Street, 18th Floor, Philadelphia, PA 19103.

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 and reconciliation of GAAP net income (loss) attributable to common shareholders to adjusted net income attributable to common shareholders.

The following financial statements reflect for all periods presented (i) the consolidation of RSO and (ii) reflect the corresponding change in the Company's fiscal year end from September 30th to December 31st to conform to the fiscal year of RSO.

   
   
RESOURCE AMERICA, INC.  
CONSOLIDATED BALANCE SHEETS  
(in thousands, except share data)  
   
    September 30,
2013
    December 31,
2012
 
    (unaudited)     (unaudited)  
ASSETS         (restated)  
  Cash   $ 19,439     $ 11,899  
  Restricted cash     558       638  
  Receivables     3,348       468  
  Receivables from managed entities and related parties, net     30,288       30,618  
  Investments in real estate, net     17,128       18,041  
  Investment securities, at fair value     9,758       10,576  
  Investments in unconsolidated loan manager     37,345       37,221  
  Investments in unconsolidated entities     13,899       13,156  
Assets of consolidated variable interest entity ("VIE") - RSO:                
  Cash and cash equivalents (including restricted cash)     203,658       179,390  
  Investments, at fair value     232,783       256,433  
  Loans     1,644,587       1,849,428  
  Investment in real estate and unconsolidated entities     128,099       120,706  
  Other assets     62,341       70,600  
  Total assets of consolidated VIE - RSO     2,271,468       2,476,557  
  Property and equipment, net     4,955       2,590  
  Deferred tax assets, net     29,751       28,274  
  Other assets     5,574       6,726  
    Total assets   $ 2,443,511     $ 2,636,764  
                 
LIABILITIES AND EQUITY                
  Liabilities:                
  Accrued expenses and other liabilities   $ 27,613     $ 21,559  
  Payables to managed entities and related parties     3,037       3,536  
  Borrowings     20,380       21,040  
  Liabilities of consolidated VIE - RSO:                
    Borrowings     1,422,430       1,785,600  
    Other liabilities     62,955       71,239  
    Total liabilities of consolidated VIE - RSO     1,485,385       1,856,839  
    Total liabilities     1,536,415       1,902,974  
                 
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; 30,341,710 and 30,069,822 shares issued (including nonvested restricted stock of 419,606 and 604,353), respectively     299       295  
  Additional paid-in capital     288,238       286,048  
  Accumulated deficit     (26,420 )     (29,486 )
  Treasury stock, at cost; 10,109,435 and 9,914,090 shares, respectively     (104,869 )     (103,472 )
  Accumulated other comprehensive loss     (2,310 )     (2,197 )
    Total stockholders' equity     154,938       151,188  
  Noncontrolling interests     218       279  
  Noncontrolling interests attributable to RSO     751,940       582,323  
    Total equity     907,096       733,790  
    $ 2,443,511     $ 2,636,764  
                 
                 
                 
RESOURCE AMERICA, INC.  
CONSOLIDATED STATEMENTS OF OPERATIONS  
(in thousands, except per share data)  
(unaudited)  
   
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2013     2012     2013     2012  
REVENUES:         (Restated)           (Restated)  
Real estate (includes revenues of $4,701, $2,446, $9,794 and $9,169 related to RSO)   $ 15,950     $ 11,292     $ 39,443     $ 31,929  
Financial fund management (includes revenues of $450, $2,508, $720 and $4,902 related to RSO)     8,502       6,083       15,234       15,378  
Commercial finance     (30 )     (167 )     (243 )     (1,535 )
      24,422       17,208       54,434       45,772  
Revenues from consolidated VIE - RSO     23,786       35,669       76,011       90,657  
Elimination of consolidated revenues attributed to operating segments     (5,183 )     (4,988 )     (10,608 )     (12,733 )
    Total revenues     43,025       47,889       119,837       123,696  
COSTS AND EXPENSES:                                
Real estate     11,178       7,684       29,514       22,477  
Financial fund management     3,547       3,909       7,769       11,282  
Commercial finance     75       103       (99 )     451  
Restructuring expenses     --       --       --       365  
General and administrative     2,505       2,530       6,807       7,564  
Impairment charges     --       2,280       --       2,280  
Provision for credit losses     1,808       6,336       3,793       14,996  
Depreciation and amortization     413       529       1,318       1,592  
      19,526       23,371       49,102       61,007  
Expenses from consolidated VIE - RSO     15,554       13,230       43,110       39,752  
Elimination of consolidated expenses attributed to operating segments     (4,861 )     (4,950 )     (10,178 )     (12,589 )
    Total expenses     30,219       31,651       82,034       88,170  
OPERATING INCOME     12,806       16,238       37,803       35,526  
                                 
OTHER INCOME (EXPENSE):                                
(Loss) gain on deconsolidation and sale of subsidiary     --       (140 )     --       54,542  
Other-than-temporary impairment on investments     --       --       (214 )     (74 )
Interest expense     (530 )     (544 )     (1,525 )     (1,767 )
Other income, net     128       29       400       6  
      (402 )     (655 )     (1,339 )     52,707  
Other income of consolidated VIE - RSO     16,607       --       16,607       5,464  
Elimination of consolidated VIE - RSO other income attributable to operating segments     162       34       224       101  
      16,367       (621 )     15,492       58,272  
Income from continuing operations before taxes     29,173       15,617       53,295       93,798  
Income tax provision of consolidated VIE - RSO     722       3,979       4,221       6,978  
Income tax provision (benefit)     1,261       (3,984 )     (396 )     13,358  
Income from continuing operations     27,190       15,622       49,470       73,462  
Loss from discontinued operations, net of tax     --       (8 )     (2 )     (38 )
Net income     27,190       15,614       49,468       73,424  
Net (income) loss attributable to noncontrolling interests - RAI     (40 )     36       (23 )     30  
Net income attributable to noncontrolling interests of consolidated VIE - RSO     (23,708 )     (17,917 )     (44,394 )     (47,892 )
Net income (loss) attributable to common shareholders   $ 3,442     $ (2,267 )   $ 5,051     $ 25,562  
                                 
                                 
                                 
RESOURCE AMERICA, INC.  
CONSOLIDATED STATEMENTS OF OPERATIONS - (Continued)  
(in thousands, except per share data)  
(unaudited)  
                       
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2013   2012     2013     2012  
        (Restated)           (Restated)  
Amounts attributable to common shareholders:                      
Income (loss) from continuing operations   $ 3,442   $ (2,259 )   $ 5,053     $ 25,600  
Discontinued operations     --     (8 )     (2 )     (38 )
Net income (loss)   $ 3,442   $ (2,267 )   $ 5,051     $ 25,562  
                               
Basic earnings (loss) per share:                              
Continuing operations   $ 0.17   $ (0.11 )   $ 0.25     $ 1.29  
Discontinued operations     --     --       --       --  
Net income (loss)   $ 0.17   $ (0.11 )   $ 0.25     $ 1.29  
Weighted average shares outstanding     20,342     20,102       20,255       19,786  
                               
Diluted earnings (loss) per share:                              
Continuing operations   $ 0.16   $ (0.11 )   $ 0.23     $ 1.23  
Discontinued operations     --     --       --       --  
Net income (loss)   $ 0.16   $ (0.11 )   $ 0.23     $ 1.23  
Weighted average shares outstanding     21,872     20,102       21,931       20,845  
                               
                               
                               

Schedule I

RECONCILIATION OF GAAP NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS TO  
ADJUSTED NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS(1)  
(in thousands, except per share data)  
(unaudited)  
   
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2013   2012     2013   2012  
        (Restated)         (Restated)  
Net income (loss) attributable to common shareholders - GAAP   $ 3,442   $ (2,267 )   $ 5,051   $ 25,562  
                             
Adjustment, net of tax:                            
Net loss attributable to common shareholders - commercial finance     1,660     5,359       5,384     7,266  
Gain on sale of subsidiary     --     --       --     (32,725 )
                             
Adjusted net income attributable to common shareholders   $ 5,102   $ 3,092     $ 10,435   $ 103  
                             
Adjusted weighted average diluted shares outstanding (2)     21,872     21,141       21,931     20,845  
                             
Adjusted net income attributable to common shareholders per common per share-diluted   $ 0.23   $ 0.15     $ 0.48   $ --  
                             

(1) Adjusted net income attributable to common shareholders presents the Company's operations without the effect of its commercial finance operations and gain on the sale of a subsidiary. The Company believes that this provides useful information to investors since it allows investors to evaluate the Company's progress in both its real estate and financial fund management segments for the three and nine months ended September 30, 2013 and 2012 separately from its commercial finance operations and gain realized on the sale of a subsidiary. Adjusted net income attributable to common shareholders should not be considered as an alternative to net income (loss) attributable to common shareholders (computed in accordance with GAAP). Instead, adjusted net income attributable to common shareholders should be reviewed in connection with net income (loss) attributable to common shareholders in the Company's consolidated financial statements, to help analyze how the Company's business is performing.

(2) Dilutive shares used in the calculation of adjusted net income attributable to common shareholders per common share-diluted included an additional 1.0 million shares for the three months ended September 30, 2012, which were anti-dilutive for the period and, as such, were not used in the calculation of GAAP loss attributable to common shareholders per common share-diluted.

Contact Information

  • Contact:
    Thomas C. Elliott
    Chief Financial Officer
    Resource America, Inc.
    One Crescent Drive, Suite 203
    Philadelphia, PA 19112
    (215) 546-5005
    (215) 640-6357 (fax)