At September 30,
----------------------------------------
2006 2005
------------------ -----------------
Financial fund management $ 10.6 billion (1) $ 6.1 billion (1)
Real estate 0.9 billion (2) 0.6 billion (2)
Commercial finance 0.6 billion (3) 0.4 billion (3)
------------------ -----------------
$ 12.1 billion $ 7.1 billion
================== =================
(1) We value our financial fund management assets at their amortized cost.
(2) We value our managed real estate assets as the sum of: the amortized
cost of our commercial real estate loans; the book value of real
estate and other assets held by our real estate investment
partnerships and tenant-in-common, or TIC, property interests; the
amount of our outstanding legacy loan portfolio; and the book value of
our interests in real estate.
(3) We value our commercial finance assets as the sum of the book value of
the equipment and notes financed by us.
Operating income as adjusted, before depreciation and amortization, was
$8.8 million and $30.3 million for the fourth quarter and fiscal year ended
September 30, 2006, respectively, as compared to $2.7 million and $10.9
million for the fourth quarter and fiscal year ended September 30, 2005,
respectively, an increase of $6.1 million (223%) and $19.4 million (179%),
respectively. The following reconciles operating income as adjusted to
our operating income for the quarters and fiscal years ended September 30,
2006 and 2005 (in thousands):
Three Months Ended Years Ended
September 30, September 30,
----------------- ------------------
2006 2005 2006 2005
------- ------- -------- -------
Operating income $ 8,100 $ 1,987 $ 27,258 $ 8,643
Plus:
Depreciation and amortization 709 738 3,064 2,209
------- ------- -------- -------
Operating income as adjusted $ 8,809 $ 2,725 $ 30,322 $10,852
======= ======= ======== =======
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 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 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.
For more information, please visit our website at www.resourceamerica.com
or contact investor relations at pschreiber@resourceamerica.com.
Highlights for the Fourth Quarter, Fiscal Year Ended September 30, 2006 and
Recent Developments
CORPORATE:
-- The Company increased its managed assets to $12.1 billion at September
30, 2006 from $7.1 billion at September 30, 2005 (70%). Additionally, the
Company closed two CDOs subsequent to September 30, 2006 (of which $793.0
million was included in our year end assets under management) for which it
has been engaged as the collateral manager. These CDOs will begin to
generate management fees at the end of the first quarter of fiscal 2007.
-- The Company increased its revenues to $23.3 million and $78.8 million
for the fourth quarter and fiscal year ended September 30, 2006,
respectively, an increase of $10.8 million (87%) and $31.7 million (67%)
from the fourth quarter and fiscal year ended September 30, 2005,
respectively.
-- The Company repurchased 61,079 shares of its common stock for $1.2
million at an average price of $19.39 in the fourth quarter ended September
30, 2006 and 820,559 shares of its common stock for $14.6 million at an
average price of $17.84 for the fiscal year ended September 30, 2006.
-- As of September 30, 2006, the Company employed 224 full-time workers
(including 76 investment professionals), an increase of 70, or 45%, from
154 employees (including 51 investment professionals) at September 30,
2005.
-- The Company increased its cash balance by $7.3 million to $37.6
million at September 30, 2006 from $30.4 million at September 30, 2005.
Additionally, $8.1 million and $5.0 million of cash was held in escrow
accounts at September 30, 2006 and 2005, respectively.
FINANCIAL FUND MANAGEMENT:
-- The Company's financial fund management division increased its assets
under management to $10.6 billion at September 30, 2006, an increase of
$4.5 billion (73%) from September 30, 2005.
-- Financial fund management revenues increased to $30.8 million for the
fiscal year ended September 30, 2006 from $15.9 million (94%) for the
fiscal year ended September 30, 2005.
-- Apidos Capital Management, LLC ("Apidos"), the Company's wholly owned
subsidiary focusing on investing in financing, structuring and managing
bank loans, increased it managed assets to $1.9 billion at September 30,
2006 from $413.4 million (366%) at September 30, 2005.
-- Ischus Capital Management, LLC ("Ischus"), the Company's wholly owned
subsidiary focusing on investing in financing, structuring and managing
asset-backed securities, including residential mortgage-backed and
commercial mortgage-backed securities, increased its managed assets to $4.4
billion at September 30, 2006 from $2.8 billion (56%) at September 30,
2005.
-- Trapeza Capital Management ("Trapeza"), the Company's 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 $4.2 billion at September 30, 2006 from $2.9 billion (46%) at
September 30, 2005.
REAL ESTATE:
-- Resource Real Estate Holdings, Inc. ("RRE"), the Company's real estate
asset manager that invests in and manages investment vehicles that manage
real estate assets and operates the Company's commercial real estate debt
platform, increased its assets under management to $883.7 million at
September 30, 2006, an increase of $264.9 million (43%) from September 30,
2005. Excluding assets managed in our legacy portfolio, RRE's assets under
management increased by $496.0 million (172%) to $784.5 million at
September 30, 2006 from $288.5 million at September 30, 2005.
-- Commercial real estate debt portfolio managed on behalf of Resource
Capital Corp. grew to $439.7 million at September 30, 2006 from $86.9
million (406%) at September 30, 2005.
-- RRE revenues increased to $23.7 million for the fiscal year ended
September 30, 2006 from $17.8 million (33%) for the fiscal year ended
September 30, 2005. The fiscal year ended September 30, 2006 included the
sale of a partial interest in a real estate venture, resulting in a $4.2
million gain. In the fiscal year ended September 30, 2005, we realized a
gain of $6.3 million from refinancing the mortgage on this investment.
-- RRE resolved loans with a combined book value of $43.9 million,
realizing $43.6 million in net proceeds during the fiscal year ended
September 30, 2006.
COMMERCIAL FINANCE:
-- LEAF Financial Corporation ("LEAF"), the Company's commercial finance
asset manager, increased its lease and note originations to $423.6 million
for the fiscal year ended September 30, 2006, an increase of $172.8 million
(69%) from the fiscal year ended September 30, 2005.
-- Commercial finance assets under management increased to $612.7 million
at September 30, 2006, an increase of $273.0 million (80%) from September
30, 2005.
-- LEAF II, a publicly-registered partnership managed by LEAF on behalf
of individual investors, completed its public offering on October 13, 2006
after having raised the maximum of $60.0 million under its registration
statement.
-- LEAF's revenues increased to $23.8 million for the fiscal year ended
September 30, 2006 from $13.4 million (78%) for the fiscal year ended
September 30, 2005.
-- LEAF entered into a $150.0 million revolving warehouse credit facility
with a group of banks led by National City Bank.
-- LEAF filed a $120.0 million registration statement with the Securities
Exchange Commission on October 2, 2006 for LEAF III.
RESOURCE EUROPE:
-- In April 2006, the Company commenced its European leveraged loan
operations, Resource Europe, based in London, England, and hired Rob
Reynolds and four other professionals to manage and develop these
operations.
-- As of November 21, 2006, Resource Europe managed EUR 100.0 million of
bank loan assets.
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 1 of the Company's Annual Report on Form 10-K.
The remainder of this release contains the Company's consolidated balance
sheets, consolidated statements of operations and consolidated statements
of cash flows.
RESOURCE AMERICA, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
September 30,
--------------------
2006 2005
--------- ---------
ASSETS
Cash $ 37,622 $ 30,353
Restricted cash 8,103 5,000
Accounts receivable 1,847 10,677
Receivables from managed entities 8,795 4,280
Investments in commercial finance 108,850 41,394
Assets held for sale 1,312 107,520
Loans held for investment 69,314 97,752
Investments in real estate 50,104 46,049
Investment securities available-for-sale 64,857 38,353
Investments in unconsolidated entities 26,626 24,564
Property and equipment, net 9,525 30,521
Deferred income taxes 6,408 7,086
Other assets 23,390 15,486
--------- ---------
Total assets $ 416,753 $ 459,035
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 12,448 $ 7,794
Accrued expenses and other liabilities 14,341 16,835
Payables to managed entities 1,579 591
Liabilities associated with assets held for sale 1,145 74,438
Borrowings 172,238 147,302
Deferred revenue 1,592 1,239
Deferred income tax liabilities 10,746 7,086
Minority interests 9,602 16,614
--------- ---------
Total liabilities 223,691 271,899
--------- ---------
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; 26,401,708 and 26,371,780 shares
issued, respectively 264 264
Additional paid-in capital 259,882 258,019
Retained earnings 25,464 9,845
Treasury stock, at cost; 9,110,290 and 8,312,760
shares, respectively (96,960) (82,556)
ESOP loan receivable (465) (488)
Accumulated other comprehensive income 4,877 2,052
--------- ---------
Total stockholders' equity 193,062 187,136
--------- ---------
$ 416,753 $ 459,035
========= =========
RESOURCE AMERICA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Three Months Ended Years Ended
September 30, September 30,
------------------ ------------------
2006 2005 2006 2005
-------- -------- -------- --------
(unaudited)
REVENUES:
Financial fund management $ 10,165 $ 5,036 $ 30,834 $ 15,944
Real estate 5,316 3,253 23,676 17,791
Commercial finance 7,357 4,191 23,840 13,381
Resource Europe 474 - 474 -
-------- -------- -------- --------
23,312 12,480 78,824 47,116
COSTS AND EXPENSES:
Financial fund management 3,769 3,257 11,104 9,110
Real estate 3,857 1,861 12,122 9,903
Commercial finance 4,061 1,908 14,443 8,884
Resource Europe 566 - 995 -
General and administrative 2,250 2,729 9,838 8,367
Depreciation and amortization 709 738 3,064 2,209
-------- -------- -------- --------
15,212 10,493 51,566 38,473
-------- -------- -------- --------
OPERATING INCOME 8,100 1,987 27,258 8,643
OTHER INCOME (EXPENSE):
Interest expense (4,560) (1,288) (10,119) (2,811)
Minority interest (539) (245) (1,775) (1,403)
Other income, net 1,510 762 5,154 4,550
-------- -------- -------- --------
(3,589) (771) (6,740) 336
-------- -------- -------- --------
Income from continuing operations
before taxes and cumulative effect
of a change in accounting principle 4,511 1,216 20,518 8,979
Provision for income taxes 657 423 3,236 3,591
-------- -------- -------- --------
Income from continuing operations
before cumulative effect of a
change in accounting principle 3,854 793 17,282 5,388
Income (loss) from discontinued
operations, net of tax 254 (1,974) 1,231 11,070
Cumulative effect of a change in
accounting principle, net of tax - - 1,357 -
-------- -------- -------- --------
NET INCOME (LOSS) $ 4,108 $ (1,181) $ 19,870 $ 16,458
======== ======== ======== ========
Basic earnings (loss) per common
share:
Continuing operations $ 0.22 $ 0.04 $ 0.98 $ 0.30
Discontinued operations 0.02 (0.11) 0.07 0.63
Cumulative effect of accounting
change - - 0.08 -
-------- -------- -------- --------
Net income (loss) $ 0.24 $ (0.07) $ 1.13 $ 0.93
======== ======== ======== ========
Weighted average shares outstanding 17,329 18,112 17,627 17,696
======== ======== ======== ========
Diluted earnings (loss) per common
share:
Continuing operations $ 0.21 $ 0.04 $ 0.90 $ 0.28
Discontinued operations 0.01 (0.10) 0.07 0.58
Cumulative effect of accounting
change - - 0.07 -
-------- -------- -------- --------
Net income (loss) $ 0.22 $ (0.06) $ 1.04 $ 0.86
======== ======== ======== ========
Weighted average shares outstanding 18,915 20,437 19,121 19,204
======== ======== ======== ========
Dividends declared per common share $ 0.06 $ 0.05 $ 0.24 $ 0.20
RESOURCE AMERICA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Years Ended September 30,
----------------------------
2006 2005 (1) 2004 (1)
-------- -------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 19,870 $ 16,458 $ 18,409
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 3,180 2,247 1,696
Equity in earnings of unconsolidated
entities (8,747) (7,807) (8,679)
Minority interest earnings 1,775 1,403 -
Distributions from unconsolidated entities 12,570 13,899 7,041
Income from discontinued operations (1,231) (11,070) (16,799)
Gain on sale of investment securities
available-for-sale (668) (1,544) (9,453)
(Gain) loss on asset dispositions (7,715) (7,781) 3,802
Deferred income tax (benefit) provision (3,120) 3,591 1,127
Non-cash compensation on long-term incentive
plans 1,739 1,251 753
Non-cash compensation issued 2,396 - -
Non-cash compensation received (1,844) (1,839) -
Tax benefit from exercise of stock options - 2,517 121
Increase in net assets of FIN 46 entities - (2,922) (717)
Increase in commercial finance investments (68,376) (17,886) (16,720)
Changes in operating assets and
liabilities 12,474 (9,471) 6,894
--------- --------- ---------
Net cash used in operating activities of
continuing operations (39,054) (18,954) (12,525)
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (4,141) (2,414) (1,604)
Payments received on real estate loans and
real estate 42,058 7,417 26,441
Investments in real estate (33,004) (16,753) (6,619)
Return of capital from investments in
unconsolidated entities - 9,390 -
Purchases of investment securities
available-for-sale (34,820) (26,800) (10,372)
Proceeds from sales of investment securities
available-for-sale 7,205 5,038 20,170
Increase in restricted cash (3,103) (5,000) -
Dividends received from Atlas America - - 52,133
(Increase) decrease in other assets (13,821) 321 12,066
--------- --------- ---------
Net cash (used in) provided by investing
activities of continuing operations (39,626) (28,801) 92,215
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in borrowings $ 570,448 $ 267,643 $ 142,857
Increase in principal payments on
borrowings (501,088) (258,865) (233,097)
Investor contributions to financial fund
management investments - 10,410 -
Dividends paid (4,251) (3,533) (2,619)
Proceeds from issuance of stock 133 5,819 613
Purchase of treasury stock (14,642) (5,179) -
Tax benefit from exercise of stock options 231 - -
Other - (1,660) (197)
--------- --------- ---------
Net cash provided by (used in) financing
activities of continuing operations 50,831 14,635 (92,443)
CASH FLOWS FROM DISCONTINUED OPERATIONS:
Operating activities $ 1,771 $ 23,566 $ 35,214
Investing activities 37,172 - -
--------- --------- ---------
Net cash provided by discontinued
operations 38,943 23,566 35,214
Net cash retained by entities previously
consolidated (3,825) - -
Increase (decrease) in cash 7,269 (9,554) 22,461
Cash at beginning of period 30,353 39,907 17,446
--------- --------- ---------
Cash at end of period $ 37,622 $ 30,353 $ 39,907
========= ========= =========
(1) Revised presentation to reflect detail of cash flows from discontinued
operations.
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 $20.8 million for the fiscal year ended September 30, 2006, an
increase of $9.5 million (84%) as compared to $11.3 million for the fiscal
year ended September 30, 2005. The following reconciles net cash provided
by continuing operations, as adjusted to net cash (used in) operating
activities of continuing operations for the fiscal years ended September
30, 2006 and 2005, respectively (in thousands):
Fiscal Years Ended
September 30,
--------------------
2006 2005
--------- ---------
Net cash (used in) operating activities of continuing
operations $ (39,054) $ (18,954)
Adjustments:
Increase in commercial finance investments 68,376 17,886
Changes in operating assets and liabilities (12,474) 9,471
Cash proceeds from the sale of a partial partnership
interest 4,000 -
Increase in net assets of FIN 46 entities - 2,922
--------- ---------
Net cash provided by operating activities of
continuing operations, as adjusted $ 20,848 $ 11,325
========= =========
Contact Information: CONTACT: STEVEN KESSLER CHIEF FINANCIAL OFFICER RESOURCE AMERICA, INC. 1845 WALNUT STREET, SUITE 1000 PHILADELPHIA, PA 19103 215/546-5005, 215/546-4785 (fax)