At June 30,
---------------------------------
2007 2006
--------------- ---------------
Financial fund management $ 14.2 billion $ 9.2 billion
Real estate 1.5 billion 0.7 billion
Commercial finance 1.1 billion 0.6 billion
--------------- ---------------
$ 16.8 billion $ 10.5 billion
=============== ===============
Operating income as adjusted, before depreciation and amortization, was
$20.1 million and $45.8 million for the third fiscal quarter and nine
months ended June 30, 2007, as compared to $5.7 million and $21.5 million
for the third fiscal quarter and nine months ended June 30, 2006, an
increase of $14.3 million and $24.3 million, respectively. The following
reconciles operating income as adjusted to operating income (in thousands):
Three Months Ended Nine Months Ended
June 30, June 30,
------------------- -------------------
2007 2006 2007 2006
--------- --------- --------- ---------
Operating income $ 19,344 $ 5,056 $ 43,618 $ 19,158
Plus:
Depreciation and amortization 728 681 2,156 2,355
--------- --------- --------- ---------
Operating income as adjusted $ 20,072 $ 5,737 $ 45,774 $ 21,513
========= ========= ========= =========
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 Third Fiscal Quarter Ended June 30, 2007 and Recent
Developments
-- The Company entered into a new 5-year $75.0 million loan and security
agreement with Commerce Bank, N.A., and U.S. Bank, N.A. This facility
replaces the $25.0 million revolving credit facility the Company previously
had with Commerce Bank.
-- On July 27, 2007, the Board of Directors of the Company announced a
new share repurchase plan for up to $50.0 million of its outstanding
shares.
-- The Company established a new division that will seek to sponsor
investment vehicles that will make majority private equity investments in
banks. This division will augment the Company's existing private equity
programs that have raised $62.1 million to invest in banks. The Company
hired Kent Carstater to lead the new effort. Mr. Carstater was formerly a
principal in the investment banking group at Keefe, Bruyette & Woods, an
investment bank specializing in the financial services sector.
-- Resource Capital Corp. ("RCC"), a real estate investment trust
("REIT") managed by the Company and in which the Company owns approximately
1.9 million common shares, declared a cash dividend of $0.41 per common
share for the quarter ended June 30, 2007.
-- In June 2007, LEAF Financial Corporation ("LEAF"), the Company's
commercial finance asset manager, along with its investment partnerships,
acquired substantially all of the assets of the leasing division of Pacific
Capital Bank, N.A., for approximately $282.2 million, including acquisition
costs. LEAF's investment partnerships acquired $269.5 million of leases
and notes of which $201.7 million were acquired during the quarter ended
June 30, 2007. LEAF will retain the lease origination and management
platform as well as an experienced small ticket leasing team including
senior management, originations, and operations personnel that will
continue to operate in California and is expected to add in excess of
$100.0 million in annual lease and note origination capability.
-- LEAF increased its assets under management to $1.1 billion at June 30,
2007, an increase of $520.0 million (95%) from June 30, 2006. LEAF
increased its commercial finance originations to $396.9 million for the
third fiscal quarter ended June 30, 2007, an increase of $279.2 million
(237%) from the third fiscal quarter ended June 30, 2006.
-- The Company's financial fund management operating segment increased
its assets under management at June 30, 2007 to $14.2 billion, an increase
of $5.0 billion (54%) from June 30, 2006.
-- 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 $1.5
billion at June 30, 2007, an increase of $0.8 billion (112%) from June 30,
2006.
-- LEAF had three bank facilities as of June 30, 2007 with an aggregate
outstanding balance of $281.0 million. As of August 3, 2007, these three
facilities had an aggregate outstanding balance of $190.6 million. These
facilities are non-recourse to the Company and are secured by the leases
and notes financed thereunder, which assets had a value of $313.9 million
as of June 30, 2007 and $208.5 million as of August 3, 2007. LEAF uses
these bank facilities to finance leases and notes that it subsequently
sells to investment partnerships that LEAF sponsors and manages.
-- The Company's bank loan business had two outstanding warehouse
facilities as of June 30, 2007, with an aggregate outstanding balance of
$414.2 million ($264.5 million as of August 3, 2007). The Company shares
the risk of first loss on these facilities with the financial institutions
that sponsor them, but the Company's maximum exposure under these
facilities is $14.1 million after taxes, of which $9.0 million in
restricted cash has been deposited in escrow. The Company is currently
marketing Apidos VI which will, upon its pricing which is anticipated to
take place in September 2007, acquire the majority of the loans financed by
these facilities.
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)
June 30, September 30,
2007 2006
------------ ------------
(unaudited)
ASSETS
Cash $ 17,169 $ 37,622
Restricted cash 15,906 8,103
Receivables 15,671 2,312
Receivables from managed entities 22,579 8,795
Investments in commercial finance 313,900 108,850
Loans held for investment 414,290 69,314
Investments in real estate 47,097 50,104
Investment securities available-for-sale 67,487 64,857
Investments in unconsolidated entities 35,039 26,626
Property and equipment, net 11,725 9,525
Deferred income taxes 18,577 6,408
Goodwill 12,692 -
Other assets 27,599 24,237
------------ ------------
Total assets $ 1,019,731 $ 416,753
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable, accrued expenses and other
liabilities $ 59,142 $ 29,526
Payables to managed entities 950 1,579
Borrowings 748,631 172,238
Deferred income tax liabilities 3,246 10,746
Minority interests 8,750 9,602
------------ ------------
Total liabilities 820,719 223,691
------------ ------------
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 264,461 259,882
Retained earnings 36,268 25,464
Treasury stock, at cost; 9,207,618 and
9,110,290 shares, respectively (99,522) (96,960)
ESOP loan receivable (446) (465)
Accumulated other comprehensive (loss) income (2,016) 4,877
------------ ------------
Total stockholders' equity 199,012 193,062
------------ ------------
$ 1,019,731 $ 416,753
============ ============
RESOURCE AMERICA, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
(unaudited)
Three Months Ended Nine Months Ended
June 30, June 30,
------------------ ------------------
2007 2006 2007 2006
-------- -------- -------- --------
REVENUES
Financial fund management $ 19,094 $ 7,376 $ 47,511 $ 20,669
Real estate 7,008 4,500 18,580 18,360
Commercial finance 12,808 5,885 28,461 16,483
-------- -------- -------- --------
38,910 17,761 94,552 55,512
COSTS AND EXPENSES
Financial fund management 5,925 2,700 15,878 7,764
Real estate 3,971 3,286 10,179 8,265
Commercial finance 5,416 3,911 13,607 10,382
General and administrative 3,526 2,127 9,114 7,588
Depreciation and amortization 728 681 2,156 2,355
-------- -------- -------- --------
19,566 12,705 50,934 36,354
-------- -------- -------- --------
OPERATING INCOME 19,344 5,056 43,618 19,158
OTHER INCOME (EXPENSE)
Interest expense (10,176) (1,894) (22,461) (5,559)
Minority interests (980) (465) (2,255) (1,236)
Other income, net 2,079 809 6,418 3,644
-------- -------- -------- --------
(9,077) (1,550) (18,298) (3,151)
-------- -------- -------- --------
Income from continuing operations
before income taxes and cumulative
effect of a change in accounting
principle 10,267 3,506 25,320 16,007
Provision for income taxes 4,312 393 9,477 2,579
-------- -------- -------- --------
Income from continuing operations
before cumulative effect of a
change in accounting principle 5,955 3,113 15,843 13,428
(Loss) income from discontinued
operations, net of tax (1,450) (113) (1,506) 977
Cumulative effect of a change in
accounting principle, net of tax - - - 1,357
-------- -------- -------- --------
NET INCOME $ 4,505 $ 3,000 $ 14,337 $ 15,762
======== ======== ======== ========
Basic earnings per common share:
Continuing operations $ 0.34 $ 0.18 $ 0.91 $ 0.76
Discontinued operations (0.08) (0.01) (0.09) 0.05
Cumulative effect of accounting
change - - - 0.08
-------- -------- -------- --------
Net income $ 0.26 $ 0.17 $ 0.82 $ 0.89
======== ======== ======== ========
Weighted average shares outstanding 17,569 17,536 17,463 17,727
======== ======== ======== ========
Diluted earnings per common share:
Continuing operations $ 0.31 $ 0.16 $ 0.83 $ 0.70
Discontinued operations (0.07) - (0.08) 0.05
Cumulative effect of accounting
change - - - 0.07
-------- -------- -------- --------
Net income $ 0.24 $ 0.16 $ 0.75 $ 0.82
======== ======== ======== ========
Weighted average shares outstanding 19,210 19,107 19,215 19,191
======== ======== ======== ========
Dividends declared per common share $ 0.07 $ 0.06 $ 0.20 $ 0.18
RESOURCE AMERICA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Nine Months Ended
June 30,
----------------------
2007 2006
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 14,337 $ 15,762
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 2,712 2,355
Discount on receivables from managed entities 344 -
Equity in earnings of unconsolidated entities (11,637) (6,497)
Minority interests 2,255 1,236
Distributions from unconsolidated entities 12,995 9,824
Loss (income) from discontinued operations 1,506 (977)
Gain on sale of assets (6,783) (6,971)
Deferred income tax (benefit) provision (6,884) 1,981
Non-cash compensation on long-term incentive plans 1,983 1,346
Non-cash compensation issued 1,630 1,614
Non-cash compensation received (1,550) (1,259)
Increase in commercial finance investments (137,620) (49,444)
Changes in operating assets and liabilities (1,734) (15,999)
---------- ----------
Net cash used in operating activities of continuing
operations (128,446) (48,386)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (3,406) (3,674)
Payments received on real estate loans and real
estate 15,703 30,623
Investments in real estate (16,245) (32,531)
Purchase of investments (19,821) (34,380)
Proceeds from sale of investments 6,158 5,415
Increase in restricted cash (7,166) -
Net cash paid for acquisition (20,708) -
Increase in other assets (3,423) (1,676)
---------- ----------
Net cash used in investing activities of
continuing operations (48,908) (36,223)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in borrowings 559,278 397,187
Principal payments on borrowings (395,169) (336,925)
Dividends paid (3,533) (3,206)
Distributions paid to minority interest holders (2,040) (1,274)
Proceeds from issuance of stock 927 125
Purchase of treasury stock (2,777) (13,458)
Tax benefit from the exercise of stock options 1,887 -
---------- ----------
Net cash provided by financing activities of
continuing operations 158,573 42,449
---------- ----------
CASH FLOWS FROM DISCONTINUED OPERATIONS:
Operating activities (527) 13
Investing activities - 39,842
Financing activities (1,145) -
---------- ----------
Net cash (used in) provided by discontinued
operations (1,672) 39,855
Net cash retained by entities previously
consolidated - (3,825)
---------- ----------
Decrease in cash (20,453) (6,130)
Cash at beginning of period 37,622 30,353
---------- ----------
Cash at end of period $ 17,169 $ 24,223
========== ==========
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 $21.6 million for the nine months ended June 30, 2007 as
compared to $21.1 million for the nine months ended June 30, 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):
Nine Months Ended
June 30,
----------------------
2007 2006
---------- ----------
Net cash used in operating activities of
continuing operations $ (128,446) $ (48,386)
Adjustments:
Increase in commercial finance investments 137,620 49,444
Changes in operating assets and liabilities 1,734 15,999
Proceeds from sale of a partial partnership
interest and other investments 10,647 4,000
---------- ----------
Net cash provided by operating activities of
continuing operations, as adjusted $ 21,555 $ 21,057
========== ==========
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)