EX-99.1 2 pressrelease.htm EARNINGS PRESS RELEASE earnings press release
FOR IMMEDIATE RELEASE

CONTACT: STEVEN KESSLER
CHIEF FINANCIAL OFFICER
RESOURCE AMERICA, INC.
1845 WALNUT STREET, SUITE 1000
PHILADELPHIA, PA 19103
215/546-5005, 215/546-4785 (fax)


RESOURCE AMERICA, INC.
REPORTS OPERATING RESULTS
FOR THIRD FISCAL QUARTER ENDED JUNE 30, 2005

Philadelphia, PA August 8, 2005 - Resource America, Inc. (Nasdaq: REXI) (the "Company") reported income from continuing operations of $3.5 million and $5.4 million for the third fiscal quarter and nine months ended June 30, 2005 as compared to a net loss from continuing operations of $854,000 and $220,000 for the third fiscal quarter and nine months ended June 30, 2004, an increase of $4.4 million and $5.6 million, respectively. Net income from continuing operations per common share-diluted was $0.19 and $0.28 per common share for the third fiscal quarter and nine months ended June 30, 2005 as compared to a net loss from continuing operations per common shared-diluted of $0.05 and $0.01 per common share for the third fiscal quarter and nine months ended June 30, 2004, an increase of $0.24 and $0.29, respectively. The Company's effective tax rate this quarter was 46% due to the spin off of Atlas America, Inc. The Company anticipates that its tax rate will decrease in future quarters.
 
Net income was $1.6 million and $17.6 million for the third fiscal quarter and nine months ended June 30, 2005 as compared to $2.8 million and $12.4 million for the third fiscal quarter and nine months ended June 30, 2004, a decrease of $1.2 million and an increase of $5.3 million, respectively.  Net income per common share-diluted was $0.09 and $0.93 per common share for the third fiscal quarter and nine months ended June 30, 2005 as compared to net income per common share-diluted of $0.15 and $0.68 per common share for the third fiscal quarter and nine months ended June 30, 2004, respectively.  Net income is after discontinued operations which includes results from Atlas America, Inc. (Nasdaq: ATLS), the Company’s former 80% owned subsidiary that was spun-off at June 30, 2005.  In addition, discontinued operations includes charges incurred in connection with the spin-off and a write-down related to an agreement entered into to sell one of the Company’s real estate investments.  The Company expects to receive approximately $20.0 million from the sale of this asset.
.


Earnings (loss) from continuing operations before interest, taxes, depreciation and amortization (“EBITDA”) were $8.2 million for the third fiscal quarter ended June 30, 2005 as compared to $281,000 for the third fiscal quarter ended June 30, 2004, an increase of $7.9 million. The following reconciles EBITDA to our income (loss) from continuing operations for the third fiscal quarter ended June 30, 2005 and 2004 (in thousands):

 
Three Months Ended
                 
  
June 30,
     
2005
   
2004
 
Income (loss) from continuing operations
  
$
3,522
  
$
(854
)
Plus:
              
Interest expense
    
863
    
832
  
Provision (recovery) for income taxes
   
2,955
    
(439
)
Depreciation and amortization
    
820
    
742
  
EBITDA from continuing operations
  
$
8,160
  
$
281
  

Management of the Company believes that EBITDA from continuing operations provides additional information with respect to the Company’s ability to meet its debt service, capital expenditures and working capital requirements. EBITDA is a commonly used measure of a business’ ability to generate cash flow without consideration of its financing structure. This measure is widely used by commercial banks, investment bankers, rating agencies and investors in evaluating performance relative to peers and pre-set performance standards. It is also a financial measurement that, with certain negotiated adjustments, is reported to the Company’s banks to establish conformance with its financial covenants under its current credit facilities. EBITDA is not a measure 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, equipment finance, and real estate sectors. At June 30, 2005, the Company managed approximately $5.7 billion of assets in these sectors as follows:
 
  • Fnancial fund management     $ 4.9 billion
  • Equipment finance           $ 0.3 billion
  • Real estate                $ 0.5 billion
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, 2005 and Recent Developments

All segments participated in this growth as follows:


CORPORATE:
 
®
On June 30, 2005, the Company completed the spin-off of Atlas America, Inc. The Company distributed to its stockholders 0.59367 shares of common stock of ATLS for each outstanding share of the Company’s common stock owned as of the record date of June 24, 2005. The distribution was structured as tax-free to the Company’s stockholders (other than with respect to any cash received in lieu of fractional shares).
 
®
The Company increased its managed assets to $5.7 billion at June 30, 2005 from $2.7 billion (113%) at June 30, 2004.
 
® 
The Company increased its revenues to $19.4 million in the third fiscal quarter ended June 30, 2005, an increase of 169% as compared to the quarter ended June 30, 2004.
 
® 
The Company had cash and cash equivalents of $42.9 million at June 30, 2005 as compared to $30.9 million at September 30, 2004. Both cash balances exclude ATLS cash.
 
® 
Total stockholders’ equity was $190.7 million at June 30, 2005 which reflects the spin-off of ATLS as compared to $257.9 million at September 30, 2004.
 
 
FINANCIAL FUND MANAGEMENT:
 
®
The Company’s financial fund management division increased its managed assets to $4.9 billion at June 30, 2005 from $2.1 billion (135%) at June 30, 2004.
 
®
Financial fund management revenues increased to $4.8 million in the third fiscal quarter ended June 30, 2005, an increase of $3.9 million (399%) from the quarter ended June 30, 2004.
 
®
Trapeza, the Company’s fund manager that invests in and manages trust preferred securities of bank and bank holding companies, increased its assets under management to $2.6 billion as of June 30, 2005, an increase of $571.2 million from June 30, 2004.
 
®
Ischus Capital Management, LLC (“Ischus”), the Company’s fund manager that invests in and manages Asset-Backed Securities (“ABS”), increased its assets under management to $2.1 billion as of June 30, 2005, an increase of $1.9 billion from June 30, 2004.
 
®
In July 2005, Ischus closed Ischus CDO II, Ltd., a collateralized debt obligation (“CDO”) secured by $400.0 million of ABS. Ischus will manage this vehicle on behalf of Resource Capital Corp. (“RCC”).
 
®
Apidos Capital Management, LCC (“Apidos”), the Company’s fund manager that invests in and manages syndicated bank loans, increased its assets under management to $189.0 million as of June 30, 2005. Apidos was formed in January 2005.
 
®
In August 2005, Apidos closed Apidos CDO I, Ltd., a CDO secured by $350.0 million of syndicated bank loans. Apidos will manage this vehicle on behalf of RCC.
 
 
 
EQUIPMENT FINANCE:
 
®
LEAF Financial Corporation (“LEAF”), the Company’s equipment finance fund manager, increased its assets under management to $290.7 million as of June 30, 2005, an increase of $151.8 million (109%) from June 30, 2004.
 
®
LEAF’s revenues increased to $3.5 million in the third fiscal quarter ended June 30, 2005, an increase of $2.2 million (163%) from the quarter ended June 30, 2004.
 
®
LEAF and Merrill Lynch have entered into a new agreement through which LEAF will originate and service lease transactions on behalf of Municipal Tax-Exempt Trust LEAF 2005, funded by Merrill Lynch.
 

 
REAL ESTATE:
 
®
Resource Real Estate Holdings, Inc. (“RRE”), the Company’s fund manager that invests in and manages real estate assets, increased assets under management to $481.6 million as of June 30, 2005, an increase of $43.0 million (9.8%) from June 30, 2004.
 
®
RRE revenues increased to $11.1 million in the third fiscal quarter ended June 30, 2005 an increase of $6.2 million (126%) from the quarter ended June 30, 2004.
 
®
Refinanced a mortgage in which the Company has a 50% equity interest recognizing a gain of $4.2 million and cash of $13.6 million.
 
®
Resource Real Estate Investors II private offering closed on July 15, 2005 raising $14.2 million. From October 1, 2004 through August 6, 2005, RRE has raised over $25.0 million of equity for investments in real estate which it will acquire and manage.
 
®
On July 29, 2005, the Company definitively agreed to sell its interest in the Alex Brown building to ACP Mid-Atlantic LLC. In connection with the sale, the Company expects to receive approximately $20.0 million in cash and assumption by the buyer of $65.0 million in debt. Based on the agreement, a writedown of $5.0 million net of tax was charged to discontinued operations in the third fiscal quarter ended June 30, 2005.

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 and consolidated statements of income. Such information is unaudited except for the balance sheet at September 30, 2004.
 
 
RESOURCE AMERICA, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)


   
June 30,
  
September 30,
  
   
2005
  
2004
  
   
(unaudited)
      
ASSETS
              
Current assets: 
              
Cash and cash equivalents
  
$
42,883
  
$
69,099
  
Investments in equipment finance
    
54,899
    
24,177
  
Accounts receivable
    
9,861
    
26,903
  
Receivables from related parties
    
5,522
    
976
  
Prepaid expenses and other current assets
    
5,445
    
3,755
  
Assets held for sale
    
104,781
    
102,963
  
Total current assets
    
223,391
    
227,873
  
               
Investments in real estate 
    
47,410
    
47,119
  
Investment in Resource Capital Corp. 
    
15,000
    
−
  
Investments in Trapeza entities 
    
9,616
    
8,483
  
Investments in financial fund management entities 
    
13,172
    
1,065
  
Property and equipment, net 
    
58,468
    
374,192
  
Other assets, net 
    
17,114
    
29,504
  
Goodwill 
    
−
    
37,470
  
   
$
384,171
  
$
725,706
  
               
LIABILITIES AND STOCKHOLDERS’ EQUITY
              
Current liabilities:
              
Current portion of long-term debt
  
$
700
  
$
6,151
  
Secured revolving credit facilities - equipment finance
    
45,625
    
8,487
  
Accounts payable
    
10,656
    
25,413
  
Liabilities associated with assets held for sale 
    
76,953
    
65,300
  
Accrued liabilities and other current liabilities
    
16,490
    
38,679
  
Liabilities associated with drilling contracts
    
−
    
29,375
  
Total current liabilities
    
150,424
    
173,405
  
               
Long-term debt 
    
28,469
    
114,696
  
               
Deferred revenue and other liabilities 
    
4,723
    
9,263
  
Deferred income taxes 
    
−
    
19,677
  
Minority interest − financial fund management entities 
    
9,880
    
−
  
Minority interests - energy 
    
−
    
150,750
  
Commitments and contingencies 
    
-
    
-
  
               
Stockholders’ equity:
              
Preferred stock $1.00 par value: 1,000,000 authorized shares;
none outstanding
    
-
    
-
  
Common stock, $.01 par value: 49,000,000 authorized shares 
    
260
    
255
  
Additional paid-in capital 
    
254,414
    
247,865
  
Less treasury stock, at cost 
    
(77,428
)
  
(77,667
)
Less ESOP loan receivable 
    
(493
)
  
(1,127
)
Accumulated other comprehensive income (loss) 
    
1,995
    
(1,575
)
Retained earnings 
    
11,927
    
90,164
  
Total stockholders’ equity
    
190,675
    
257,915
  
   
$
384,171
  
$
725,706
  
 
 
 
 
 
RESOURCE AMERICA, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
(unaudited)

 
 
Three Months Ended 
Nine Months Ended
             
 
June 30, 
           June 30,          
     
2005
   
2004
   
2005
   
2004
 
REVENUES
                          
Real estate
  
$
11,104
  
$
4,921
  
$
20,008
  
$
13,575
  
Equipment finance
    
3,481
    
1,326
    
9,190
    
4,191
  
Financial fund management(1)
    
4,828
    
968
    
10,908
    
4,046
  
     
19,413
    
7,215
    
40,106
    
21,812
  
COSTS AND EXPENSES
                          
Real estate
    
4,242
    
2,207
    
11,014
    
7,641
  
Equipment finance
    
2,467
    
1,975
    
6,976
    
5,627
  
Financial fund management
    
2,263
    
689
    
4,720
    
1,300
  
General and administrative 
    
1,879
    
3,840
    
5,514
    
7,403
  
Start-up costs − Resource Capital Corp.
   
309
    
−
    
1,132
    
−
  
Depreciation and amortization
    
820
    
742
    
2,133
    
1,758
  
Provision (recovery) for possible losses 
    
(12
)
  
182
    
150
    
582
  
     
11,968
    
9,635
    
31,639
    
24,311
  
OPERATING INCOME (LOSS)
    
7,445
    
(2,420
)
  
8,467
    
(2,499
)
                           
OTHER INCOME (EXPENSE)
                          
Interest expense
    
(863
)
  
(832
)
  
(2,167
)
  
(4,405
)
Minority interest in financial fund management entities
    
(415
)
  
−
    
(1,158
)
  
−
  
    Other income, net
    
310
    
1,959
    
3,788
    
6,571
  
     
(968
)
  
1,127
    
463
    
2,166
  
Income (loss) from continuing operations before taxes 
    
6,477
    
(1,293
)
  
8,930
    
(333
)
Provision (benefit) for income taxes
    
2,955
    
(439
)
  
3,572
    
(113
)
Income (loss) from continuing operations 
    
3,522
    
(854
)
  
5,358
    
(220
)
Income (loss) from discontinued operations, net of tax 
    
(1,912
)
  
3,700
    
12,281
    
12,571
  
Net income 
  
$
1,610
  
$
2,846
  
$
17,639
  
$
12,351
  
                           
Basic earnings (loss) per common share:
                          
From continuing operations
  
$
0.20
  
$
(0.05
)
$
0.30
  
$
(0.01
)
Discontinued operations
    
(0.11
)
  
0.21
    
0.70
    
0.72
  
Net income
  
$
0.09
  
$
0.16
  
$
1.00
  
$
0.71
  
Weighted average shares outstanding
    
17,716
    
17,452
    
17,582
    
17,393
  
                           
Diluted earnings (loss) per common share:
                          
From continuing operations
  
$
0.19
  
$
(0.05
)
$
0.28
  
$
(0.01
)
Discontinued operations
    
(0.10
)
  
0.20
    
0.65
    
0.69
  
Net income
  
$
0.09
  
$
0.15
  
$
0.93
  
$
0.68
  
Weighted average shares outstanding
    
18,926
    
18,599
    
18,819
    
18,189
  
                           
Dividends declared per common share 
  
$
0.05
  
$
0.03
  
$
0.15
  
$
0.10
  
 
(1)
Includes $1.4 million and $1.8 million of revenues related to Resource Capital Corp. for the three months ended June 30, 2005 and for the period from March 8, 2005 (inception) through June 30, 2005, respectively.