At December 31,
--------------------------------
2006 2005
-------------- -------------
Financial fund management $ 11.7 billion (1) $ 7.5 billion
Real estate 1.2 billion 0.7 billion
Commercial finance 0.7 billion 0.4 billion
-------------- -------------
$ 13.6 billion $ 8.6 billion
============== =============
(1) Includes assets under management of $2.0 billion at December 31, 2006
on warehouse facilities for which the Company has been engaged as the
collateral manager for CDOs not yet closed.
Operating income as adjusted, before depreciation and amortization, was
$10.0 million for the first fiscal quarter ended December 31, 2006, as
compared to $6.5 million for the first fiscal quarter ended December 31,
2005. The following reconciles operating income as adjusted to operating
income (in thousands):
Three Months Ended
December 31,
-------------------------
2006 2005
------------ ------------
Operating income $ 9,301 $ 5,669
Plus:
Depreciation and amortization 709 838
------------ ------------
Operating income as adjusted $ 10,010 $ 6,507
============ ============
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 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 First Fiscal Quarter Ended December 31, 2006 and Recent
Developments
CORPORATE:
-- In December 2006 and January 2007, Resource Capital Corp. ("RCC")
(NYSE : RSO ) completed a secondary offering and over-allotment exercise for
a total of 6.7 million of its shares at $16.50 per share ($15.5925 net of
underwriting discount) generating net proceeds of $103.1 million which was
principally used to repay outstanding debt. The closing price of RSO on
January 30, 2007 was $18.68.
-- The Company's Board of Directors has 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.
-- The Company increased its book value per share to $11.48 at December
31, 2006 from $11.17 at September 30, 2006.
-- The Company hired Joan Sapinsley as Managing Director in charge of
CMBS for its financial fund asset manager.
FINANCIAL FUND MANAGEMENT:
-- The Company's financial fund management operating segment increased
its assets under management by $4.2 billion (56%) to $11.7 billion at
December 31, 2006 from $7.5 billion at December 31, 2005.
-- Financial fund management revenues increased by $4.9 million (66%) to
$12.4 million for the first fiscal quarter ended December 31, 2006 from
$7.5 million for the first fiscal quarter ended December 31, 2005.
-- 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 $2.3 billion at December 31, 2006
from $616.5 million at December 31, 2005.
-- 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
December 31, 2006 from $3.6 billion at December 31, 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 $4.3 billion at December 31, 2006 from $3.3 billion at December
31, 2005.
-- Resource Europe Management ("Resource Europe"), the Company's European
bank loan asset manager, increased its managed assets to $244.6 million at
December 31, 2006 from $91.3 million at September 30, 2006. Resource
Europe began acquiring loans during the quarter ended September 30, 2006.
-- During the three months ended December 31, 2006, the Company closed
three CDO vehicles financing $1.0 billion of asset-backed securities,
$500.0 million of trust-preferred securities and $350.5 million of bank
loans.
-- Resource Europe entered into a warehousing arrangement with a third
party underwriter to begin ramping their second CLO transaction which is
expected to close in the Company's fourth quarter of fiscal 2007.
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 $1.2 billion at December
31, 2006, an increase of $483.0 million (71%) from December 31, 2005.
-- RRE's most recent limited partnership, Resource Real Estate IV, raised
$29.7 million in equity and closed its offering in January 2007.
COMMERCIAL FINANCE:
-- LEAF Financial Corporation ("LEAF"), the Company's commercial finance
asset manager, increased its commercial finance originations to $129.1
million for the first fiscal quarter ended December 31, 2006, an increase
of $24.7 million (24%) from the first fiscal quarter ended December 31,
2005.
-- Commercial finance assets under management increased to $681.6 million
at December 31, 2006, an increase of $267.7 million (65%) from December 31,
2005.
-- Commercial finance revenues increased to $7.1 million for the first
fiscal quarter ended December 31, 2006 from $5.1 million (40%) for the
first fiscal quarter ended December 31, 2005.
-- LEAF entered into a $250.0 million revolving non-recourse credit
facility with Morgan Stanley Bank which will be used primarily to finance
its asset-backed loans to other commercial finance companies, medical and
dental practice acquisitions loans and middle ticket lease and loan
originations.
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)
December 31, September 30,
2006 2006
------------ -------------
(unaudited)
ASSETS
Cash $ 19,868 $ 37,622
Restricted cash 13,897 8,103
Receivables from managed entities 10,587 8,795
Investments in commercial finance 172,334 108,850
Loans held for investment 283,198 69,314
Investments in real estate 49,492 50,104
Investment securities available-for-sale 70,277 64,857
Investments in unconsolidated entities 34,280 26,626
Property and equipment, net 9,277 9,525
Deferred income taxes 7,070 6,408
Other assets 33,541 26,549
------------ -------------
Total assets $ 703,821 $ 416,753
============ =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 9,483 $ 12,448
Accrued expenses and other liabilities 22,754 17,078
Payables to managed entities 1,250 1,579
Borrowings 449,874 172,238
Deferred income tax liabilities 12,458 10,746
Minority interests 9,370 9,602
------------ -------------
Total liabilities 505,189 223,691
------------ -------------
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; 26,408,298 and
26,401,708 shares issued, respectively 264 264
Additional paid-in capital 260,296 259,882
Retained earnings 28,870 25,464
Treasury stock, at cost; 9,109,151 and
9,110,290 shares, respectively (96,948) (96,960)
ESOP loan receivable (459) (465)
Accumulated other comprehensive income 6,609 4,877
------------ -------------
Total stockholders' equity 198,632 193,062
------------ -------------
$ 703,821 $ 416,753
============ =============
RESOURCE AMERICA, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
(unaudited)
Three Months Ended
December 31,
------------------
2006 2005
-------- --------
REVENUES
Financial fund management $ 12,387 $ 7,479
Real estate 4,564 4,654
Commercial finance 7,089 5,081
-------- --------
24,040 17,214
COSTS AND EXPENSES
Financial fund management 4,552 2,299
Real estate 3,013 2,265
Commercial finance 3,631 2,918
General and administrative 2,834 3,225
Depreciation and amortization 709 838
-------- --------
14,739 11,545
-------- --------
OPERATING INCOME 9,301 5,669
OTHER INCOME (EXPENSE)
Interest expense (4,591) (2,296)
Minority interest (560) (402)
Other income, net 2,528 873
-------- --------
(2,623) (1,825)
-------- --------
Income from continuing operations before taxes and
cumulative effect of a change in accounting
principle 6,678 3,844
Provision (benefit) for income taxes 2,210 (1,537)
-------- --------
Income from continuing operations before cumulative
effect of a change in accounting principle 4,468 5,381
(Loss) income from discontinued operations, net of tax (19) 938
Cumulative effect of a change in accounting principle,
net of tax - 1,357
-------- --------
NET INCOME $ 4,449 $ 7,676
======== ========
Basic earnings per common share:
Continuing operations $ 0.26 $ 0.30
Discontinued operations - 0.05
Cumulative effect of accounting change - 0.08
-------- --------
Net income $ 0.26 $ 0.43
======== ========
Weighted average shares outstanding 17,292 18,055
======== ========
Diluted earnings per common share:
Continuing operations $ 0.23 $ 0.27
Discontinued operations - 0.05
Cumulative effect of accounting change - 0.07
-------- --------
Net income $ 0.23 $ 0.39
======== ========
Weighted average shares outstanding 19,122 19,986
======== ========
Dividends declared per common share $ 0.06 $ 0.06
RESOURCE AMERICA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Three Months Ended
December 31,
----------------
2006 2005 (1)
------- -------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 4,449 $ 7,676
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 810 861
Distributions from unconsolidated entities 3,941 3,675
Equity in earnings of unconsolidated entities (3,981) (1,981)
Minority interest earnings 560 402
Loss (income) from discontinued operations 19 (938)
Gain on sale of investment securities
available-for-sale (1,347) -
Deferred income tax benefit (671) (3,190)
Gain on asset dispositions (74) (879)
Non-cash compensation on long-term incentive plans 401 310
Non-cash compensation issued 797 361
Non-cash compensation received (673) (821)
Increase in commercial finance investments (63,594) (26,523)
Changes in operating assets and liabilities (7,680) 1,965
------- -------
Net cash used in operating activities of continuing
operations (67,043) (20,439)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in real estate (10,188) (9,963)
Payments received on real estate loans and real estate 3,256 8,366
Purchases of investment securities available-for-sale (5,795) (4,453)
Proceeds from sale of available-for-sale securities 3,381 3,500
(Increase) decrease in restricted cash (5,639) 5,000
Capital expenditures (219) (1,080)
Decrease (increase) in other assets 1,769 (515)
------- -------
Net cash (used in) provided by investing activities of
continuing operations (13,435) 855
------- -------
RESOURCE AMERICA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS - (Continued)
(in thousands)
(unaudited)
Three Months Ended
December 31,
------------------
2006 2005 (1)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in borrowings 161,507 123,930
Principal payments on borrowings (97,751) (99,398)
Dividends paid (1,043) (1,082)
Proceeds from issuance of stock 25 40
Purchase of treasury stock - (3,681)
-------- --------
Net cash provided by financing activities of continuing
operations 62,738 19,809
-------- --------
CASH FLOWS FROM DISCONTINUED OPERATIONS:
Operating activities (14) (976)
Investing activities - 17,020
-------- --------
Net cash (used in) provided by discontinued operations (14) 16,044
Net cash retained by entities previously consolidated - (3,825)
-------- --------
(Decrease) increase in cash (17,754) 12,444
Cash at beginning of period 37,622 30,353
-------- --------
Cash at end of period $ 19,868 $ 42,797
======== ========
(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 $4.2 million for the first fiscal quarter ended December 31,
2006, an increase of $112,000 as compared to net cash provided by operating
activities of $4.1 million in the first fiscal quarter ended December 31,
2005. The following reconciles net cash provided by continuing operations
as adjusted to net cash used in operating activities of continuing
operations (in thousands):
Three Months Ended
December 31,
--------------------
2006 2005
--------- ---------
Net used in operating activities of continuing
operations $ (67,043) $ (20,439)
Adjustments:
Increase in equipment finance investments 63,594 26,523
Changes in operating assets and liabilities 7,680 (1,965)
--------- ---------
Net cash provided by operating activities of
continuing operations, as adjusted $ 4,231 $ 4,119
========= =========
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)