-- It is providing guidance for its fiscal year ending September 30,
2008. Net income is expected to be betweeen $1.20 and $1.40 per common
share-diluted.
-- LEAF Financial Corporation ("LEAF"), the Company's commercial finance
asset management subsidiary, is expected to contribute approximately
$26.0 to $30.0 million of pre-tax earnings before minority interest to
the Company for the fiscal year ending September 30, 2008, reflecting
the acquisition, on behalf of its investment partnerships, of the loan
portfolios and businesses of NetBank Business Finance and Dolphin
Capital Corp, both of which were acquired in November 2007. Including
these acquisitions, LEAF's assets under management increased to
approximately $1.7 billion at November 30, 2007 and its fiscal 2008
annual origination capacity is expected to exceed $1.0 billion.
-- Apidos Capital Management, the Company's corporate loan manager,
priced Apidos VI CLO, a $240.0 million securitization of corporate
loans, on November 20, 2007, with closing anticipated on December 19,
2007, after which closing the Company's total at-risk warehouse
exposure will be $10.2 million, after taxes.
-- During the fiscal year ended September 30, 2007, the Company raised,
through its financial planner network, a total of $145.2 million of
equity for investment funds and programs that it manages. The current
annualized run-rate based on fund raising activities during the fourth
quarter ended September 30, 2007 is $184.4 million. The Company expects
to raise over $200.0 million in capital through this channel in fiscal
2008.
-- The Company repurchased 188,000 shares of its common stock at an
average price of $15.03 since announcing its new share repurchase
program in July 2007.
-- The Company has adjusted its operations in light of recent market
conditions and, as a result has:
-- recorded, net of tax, a $7.6 million charge to reflect
other-than-temporary impairment of certain investments, primarily
equity investments in portfolios of asset-backed securities managed
by the Company. The Company's remaining exposure to investments in
asset-backed securities, net of minority interest and on a fair
value basis, was $1.3 million at September 30, 2007; and
-- reduced its exposure to corporate bank loans, principally in
Europe, by incurring a $2.6 million loss, net of tax, from the sale
of loans held for investment and incurred a charge of $2.9 million,
net of tax, related to a European real estate investment fund that
did not close due to market conditions.
A reconciliation of the Company's reported loss from continuing operations
to adjusted income from continuing operations. a non-GAAP measure, is
included as Schedule I to this release.
Jonathan Cohen, President and CEO of the Company commented, "We have moved
quickly to capitalize on opportunities created by the dislocations in the
market brought about by the environment that has existed since July. We
believe that we have positioned ourselves for a solid fiscal 2008 led by
(i) the expansion of LEAF Financial, our leasing and loan asset management
company, (ii) a lowering of risk through the completion of Apidos VI CLO
(thus reducing our warehouse exposure substantially) and (iii) the focus on
building our retail distribution system. We are raising significant capital
in the retail channel for our products and this contributes to the
substantial growth in assets under management. Acquisitions of quality
assets in a distressed environment is another way that we have expanded our
assets under management -- and one can see from the recent LEAF
acquisitions how this can positively impact our bottom line. We believe
more of these opportunities will exist. In addition, we are focused on
expanding our distressed loan management business which we have restarted
with the HUD portfolio acquisition."
Assets under management increased to $16.7 billion at September 30, 2007
from $12.1 billion at September 30, 2006, an increase of $4.6 billion
(38%). As of November 30, 2007, assets under management had further
increased to $17.3 billion.
The following table details the Company's assets under management by
operating segment:
At September 30,
-------------------------------
2007 2006
--------------- ---------------
Financial fund management $ 14.0 billion $ 10.6 billion
Real estate 1.6 billion 0.9 billion
Commercial finance 1.1 billion 0.6 billion
--------------- ---------------
$ 16.7 billion $ 12.1 billion
=============== ===============
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
commercial finance, real estate and financial fund management 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. The Company
intends to file its Annual Report on Form 10-K for the fiscal year ended
September 30, 2007 on or before December 14, 2007.
For more information, please visit our website at www.resourceamerica.com
or contact investor relations at pkamdar@resourceamerica.com.
Highlights for the Fourth Quarter, Fiscal Year Ended September 30, 2007 and Recent Developments
-- On November 30, 2007, LEAF acquired the business of Dolphin Capital
Corp., an equipment finance subsidiary of Lehman Brothers Bank, FSB. The
total purchase price of $171.0 million included a portfolio of small ticket
leases acquired by LEAF and immediately assigned to an investment
partnership it sponsored and manages. LEAF will retain the Dolphin lease
origination team and management platform in Moberly, Missouri.
-- On November 7, 2007, LEAF acquired at a discount substantially all of
the assets, including a portfolio of over 10,000 equipment leases and loans
to small businesses, of NetBank Business Finance, a division of NetBank,
from the Federal Deposit Insurance Corporation, for $415.2 million. LEAF
intends to sell the assets acquired to its investment partnerships prior to
June 2008. Additionally, LEAF will retain the NetBank management team and
origination platform in Columbia, South Carolina.
-- In June 2007, LEAF acquired substantially all of the assets of the
leasing division of Pacific Capital Bank N.A. ("PCB"), principally a
portfolio of small ticket leases and notes, at a total cost of $282.2
million. LEAF's investment partnerships acquired $269.5 million of leases
and notes. LEAF retained the PCB 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 Santa Barbara, California.
-- LEAF increased its assets under management to $1.1 billion at
September 30, 2007, an increase of $480.0 million (78%) from September 30,
2006. LEAF increased its commercial finance originations to $779.2 million
for fiscal 2007, an increase of $355.6 million (84%) from fiscal 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 which operates the Company's
commercial real estate debt platform, has been pursuing opportunities in
distressed real estate and real estate loans. A partnership that RRE
sponsored and is managing acquired a portfolio of non-performing loans at a
discount from the United States Department of Housing and Urban Development
consisting of 11 loans with an aggregate principal balance of approximately
$75.0 million, each secured by a first mortgage on a multifamily property.
-- RRE increased its assets under management to $1.6 billion at September
30, 2007, an increase of $0.7 billion (85%) from September 30, 2006.
-- RRE increased its apartment units managed to 15,682 at September 30,
2007, an increase of 6,322 (68%) from September 30, 2006.
-- RRE established a new property management division to manage the
majority of its investment programs as of October 1, 2007.
-- The Company's financial fund management operating segment increased
its assets under management at September 30, 2007 to $14.0 billion, an
increase of $3.4 billion (32%) from September 30, 2006.
-- The Company established a new division that will seek to sponsor
investment vehicles that will make majority private equity investments for
outside investors focused in commercial banks. This division will augment
the Company's existing private equity programs that have raised $62.1
million to make minority investments in de novo banks. The Company hired
Kent Carstater, formerly a principal in the investment banking group at
Keefe, Bruyette & Woods, an investment bank specializing in the financial
services sector, to lead the new effort.
-- The Company's bank loan business had three outstanding warehouse
facilities as of September 30, 2007, with an aggregate outstanding balance
of $439.5 million, of which $152.7 million in assets were sold but not yet
settled. Upon settlement, the warehouse debt will be reduced by $152.7
million. In addition, on November 20, 2007, the Company priced Apidos VI
CLO, a $240.0 million collateralized loan obligation ("CLO") which will
lower the Company's warehouse borrowings by another $164.4 million, leaving
$122.4 million of loans on the two remaining warehouses.
-- The Company's Board of Directors authorized the payment of a cash
dividend on February 29, 2008 in the amount of $0.07 per share of the
Company's common stock to all holders of record at the close of business on
February 15, 2008. Resource Capital Corp. ("RCC") (NYSE : RSO ), a real
estate investment trust which the Company is the external manager, declared
and paid a dividend of $0.41 per share during the fourth quarter.
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 consolidated balance
sheets, consolidated statements of operations, consolidated statements of
cash flows, a reconciliation of GAAP (loss) income from continuing
operations to adjusted income from continuing operations 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)
September 30,
--------------------
2007 2006
--------- ---------
ASSETS
Cash $ 14,624 $ 37,622
Restricted cash 19,340 8,103
Receivables 21,255 2,312
Receivables from managed entities 20,177 8,795
Loans sold, not settled 152,706 -
Loans held for investment, net 285,928 69,314
Investments in commercial finance, net 243,391 108,850
Investments in real estate, net 49,041 50,104
Investment securities available-for-sale 51,777 64,857
Investments in unconsolidated entities 36,777 26,626
Property and equipment, net 12,286 9,525
Deferred income taxes 30,995 6,408
Goodwill 7,941 -
Intangible assets, net 4,774 95
Other assets 18,664 24,142
--------- ---------
Total assets $ 969,676 $ 416,753
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable, accrued expenses and other
liabilities 60,546 29,526
Payables to managed entities 1,163 1,579
Borrowings 706,372 172,238
Deferred income tax liabilities 11,124 10,746
Minority interests 6,571 9,602
--------- ---------
Total liabilities 785,776 223,691
--------- ---------
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; 26,986,975 and 26,485,227 shares
issued, respectively (including unvested
restricted stock of 199,708 and 83,519,
respectively) 268 264
Additional paid-in capital 264,747 259,882
Retained earnings 25,724 25,464
Treasury stock, at cost; 9,369,960 and 9,110,290
shares, respectively (102,014) (96,960)
ESOP loan receivable (223) (465)
Accumulated other comprehensive (loss) income (4,602) 4,877
--------- ---------
Total stockholders' equity 183,900 193,062
--------- ---------
$ 969,676 $ 416,753
========= =========
RESOURCE AMERICA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Three Months Ended Years Ended
September 30, September 30,
------------------ ------------------
2007 2006 2007 2006
-------- -------- -------- --------
(Unaudited)
REVENUES:
Financial fund management $ 16,640 $ 10,639 $ 64,151 $ 31,308
Commercial finance 12,231 7,357 40,692 23,840
Real estate 4,407 4,716 22,987 23,076
-------- -------- -------- --------
33,278 22,712 127,830 78,224
COSTS AND EXPENSES:
Financial fund management 5,386 4,335 21,264 12,099
Commercial finance 6,074 4,061 19,681 14,443
Real estate 3,011 3,257 13,190 11,522
General and administrative 2,990 2,250 12,104 9,838
Depreciation and amortization 768 709 2,924 3,064
-------- -------- -------- --------
18,229 14,612 69,163 50,966
-------- -------- -------- --------
OPERATING INCOME 15,049 8,100 58,667 27,258
OTHER (EXPENSE) INCOME:
Interest expense (11,105) (4,560) (33,566) (10,119)
Minority interests 113 (539) (2,142) (1,775)
Other (loss) income, net (20,813) 1,510 (14,395) 5,154
-------- -------- -------- --------
(31,805) (3,589) (50,103) (6,740)
-------- -------- -------- --------
(Loss) income from continuing
operations before taxes and
cumulative effect of a change in
accounting principle (16,756) 4,511 8,564 20,518
(Benefit) provision for income
taxes (6,713) 657 2,764 3,236
-------- -------- -------- --------
(Loss) income from continuing
operations before cumulative
effect of a change in accounting
principle (10,043) 3,854 5,800 17,282
Income (loss) from discontinued
operations, net of tax 60 254 (1,446) 1,231
Cumulative effect of a change in
accounting principle, net of tax - - - 1,357
-------- -------- -------- --------
NET (LOSS) INCOME $ (9,983) $ 4,108 $ 4,354 $ 19,870
======== ======== ======== ========
Basic (loss) earnings per common
share:
Continuing operations $ (0.57) $ 0.22 $ 0.33 $ 0.98
Discontinued operations - 0.02 (0.08) 0.07
Cumulative effect of accounting
change - - - 0.08
-------- -------- -------- --------
Net (loss) income $ (0.57) $ 0.24 $ 0.25 $ 1.13
======== ======== ======== ========
Weighted average shares outstanding 17,482 17,329 17,467 17,627
======== ======== ======== ========
Diluted (loss) earnings per common
share:
Continuing operations $ (0.57) $ 0.21 $ 0.30 $ 0.90
Discontinued operations - 0.01 (0.07) 0.07
Cumulative effect of accounting
change - - - 0.07
-------- -------- -------- --------
Net (loss) income $ (0.57) $ 0.22 $ 0.23 $ 1.04
======== ======== ======== ========
Weighted average shares outstanding 17,482 18,915 19,085 19,121
======== ======== ======== ========
Dividends declared per common share $ 0.07 $ 0.06 $ 0.27 $ 0.24
RESOURCE AMERICA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Years Ended
September 30,
--------------------
2007 2006
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 4,354 $ 19,870
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)
Impairment charge on CDO investments 12,580 -
Depreciation and amortization 3,699 3,180
Equity in earnings of unconsolidated entities (15,022) (8,747)
Minority interests 2,142 1,775
Distributions from unconsolidated entities 16,212 12,570
Loss (income) from discontinued operations 1,446 (1,231)
Losses on sales of loans 5,025 -
Gains on sales of investment securities
available-for-sale (3,533) (668)
Gains on sales of assets (3,974) (7,715)
Deferred income tax benefit (14,487) (3,120)
Non-cash compensation on long-term incentive plans 2,695 1,739
Non-cash compensation issued 1,861 2,396
Non-cash compensation received (1,404) (1,844)
Increase in commercial finance investments (67,210) (68,376)
Changes in operating assets and liabilities 5,790 14,074
--------- ---------
Net cash used in operating activities of continuing
operations (49,826) (37,454)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (5,441) (4,141)
Payments received on real estate loans and real
estate 17,501 42,058
Investments in real estate (20,917) (33,004)
Purchase of investments (23,225) (34,820)
Proceeds from sale of investments 7,172 7,205
Net cash paid for acquisition (20,708) -
Increase in other assets (2,862) (13,821)
--------- ---------
Net cash used in investing activities of continuing
operations (48,480) (36,523)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in borrowings 745,598 570,448
Principal payments on borrowings (649,055) (501,088)
Dividends paid (4,770) (4,251)
Distributions paid to minority interest holders (2,368) (1,600)
Proceeds from issuance of stock 1,226 133
Increase in restricted cash (10,156) (3,103)
Purchase of treasury stock (5,368) (14,642)
Tax benefit from exercise of stock options 2,090 231
Other (611) -
--------- ---------
Net cash provided by financing activities of
continuing operations 76,586 46,128
CASH FLOWS FROM DISCONTINUED OPERATIONS:
Operating activities (133) 1,771
Investing activities - 37,172
Financing activities (1,145) -
--------- ---------
Net cash (used in) provided by discontinued
operations (1,278) 38,943
Net cash retained by entities previously consolidated - (3,825)
--------- ---------
(Decrease) increase in cash (22,998) 7,269
Cash at beginning of period 37,622 30,353
--------- ---------
Cash at end of period $ 14,624 $ 37,622
========= =========
Schedule I
RECONCILIATION OF GAAP (LOSS) INCOME FROM CONTINUING OPERATIONS
TO ADJUSTED INCOME FROM CONTINUING OPERATIONS
(in thousands, except per share data)
(Unaudited)
Three Months Ended Years Ended
September 30, September 30,
-------------------- ---------------------
2007 2006 2007 2006
--------- ---------- ---------- ----------
(Loss) income from continuing
operations - GAAP $ (10,043) $ 3,854 $ 5,800 $ 17,282
Adjustments, net of taxes:
Impairment charge on CDO
investments 7,617 - 7,617 -
Loss on sales of loans 2,648 - 2,648 -
Write off of European real
estate investment fund costs 2,885 - 2,885 -
Incentive fee and restricted
stock - RCC 772 - 772 -
Mark to market of partnership
interest 291 - 291 -
--------- ---------- ---------- ----------
Adjusted income from continuing
operations (1) $ 4,170 $ 3,854 $ 20,013 $ 17,282
========= ========== ========== ==========
Weighted average diluted shares
outstanding (2) 18,755 18,915 19,085 19,121
========= ========== ========== ==========
Adjusted income from continuing
operations per share-diluted $ 0.22 $ 0.21 $ 1.05 $ 0.90
========= ========== ========== ==========
(1) During the fourth quarter of fiscal 2007, in connection with
substantial volatility and reduction in liquidity in the global credit
markets, the Company recorded several significant adjustments. For
comparability purposes, the Company is presenting adjusted income from
continuing operations because it facilitates the evaluation of the
Company without the effect of these adjustments. Adjusted income from
continuing operations should not be considered as an alternative to
income from continuing operations (computed in accordance with GAAP).
Instead, adjusted income from continuing operations should be reviewed
in connection with income from continuing operations in the Company's
consolidated financial statements, to help analyze how the Company's
business is performing.
(2) Includes 1,273,000 diluted shares not used in the calculation of loss
from continuing operations per share-diluted for the three months
ended September 30, 2007.
This press release contains supplemental financial information determined
by methods other than in accordance with Accounting Principles Generally
Accepted in the United States of America ("GAAP"). The Company's
management uses this non-GAAP measure in its analysis of the exclusion of
certain adjustments recorded in the Company's fourth quarter of fiscal
2007. Management believes the presentation of this financial measure
excluding the impact of these items provides useful supplemental
information that is essential to a proper understanding of the financial
results of the Company. This disclosure should not be viewed as a
substitute for results determined in accordance with GAAP, nor is it
necessarily comparable to non-GAAP performance measures that may be
presented by other companies.
Schedule II
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 $23.3 million for the fiscal year ended September 30, 2007, an
increase of $1.3 million (6%) as compared to $22.0 million for the fiscal
year ended September 30, 2006. 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, 2007 and 2006, respectively (in thousands):
Fiscal Years Ended
September 30,
--------------------
2007 2006
--------- ---------
Net cash (used in) operating activities of continuing
operations $ (49,826) $ (37,454)
Adjustments:
Increase in commercial finance investments 67,210 68,376
Changes in operating assets and liabilities (5,790) (14,074)
Cash proceeds from the sale of a partial
partnership interest and other investments 11,657 5,168
--------- ---------
Net cash provided by operating activities of
continuing operations, as adjusted $ 23,251 $ 22,016
========= =========
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)