EX-99.1 2 pr033106operatingresults.htm PRESS RELEASE 033106 OPERATING RESULTS Press Release 033106 Operating Results
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 THE SECOND FISCAL QUARTER ENDED MARCH 31, 2006

Philadelphia, PA May 3, 2006 - Resource America, Inc. (Nasdaq: REXI) (the "Company") reported income from continuing operations of $5.0 million and $10.4 million for the second fiscal quarter and six months ended March 31, 2006, as compared to $7,000 and $1.1 million for the second fiscal quarter and six months ended March 31, 2005, an increase of $5.0 million and $9.3 million, respectively. Net income from continuing operations per common share-diluted was $0.25 and $0.52 per common share for the second fiscal quarter and six months ended March 31, 2006, as compared to net income from continuing operations per common share-diluted of $0.00 and $0.06 per common share for the second fiscal quarter and six months ended March 31, 2005. Operating income as adjusted, before depreciation and amortization, was $9.3 million and $15.9 million for the second fiscal quarter and six months ended March 31, 2006, respectively, as compared to $1.4 million and $654,000 for the second fiscal quarter and six months ended March 31, 2005, respectively, an increase of $7.9 million and $15.3 million. The following reconciles operating income as adjusted to our operating income (loss) for the second fiscal quarter and six months ended March 31, 2006 and 2005 (in thousands):

   
Three Months Ended
  
Six Months Ended
  
   
March 31,
  
March 31,
  
   
2006
  
2005
  
2006
  
2005
  
Operating income (loss)
  
$
8,487
  
$
989
  
$
14,205
  
$
(149
)
Plus:
                          
Depreciation and amortization
    
859
    
425
    
1,720
    
803
  
Operating income as adjusted
 
$
9,346
  
$
1,414
  
$
15,925
  
$
654
  

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 expenditusres 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.


 
 
 

Income from continuing operations for the six months ended March 31, 2006 was positively impacted by a $1.5 million tax benefit as a result of tax strategies the Company implemented during the first fiscal quarter ended December 31, 2005. The Company expects its effective annual tax rate to be 29% for fiscal 2006 and therefore expects the tax rate for the next two fiscal quarters to be higher than 29%.  Future tax rates could change if estimates of taxable income change. If the Company assumed the expected tax rate for the entire fiscal year for the second fiscal quarter and six months ended March 31, 2006, income from continuing operations per common share-diluted would have been $0.31 and $0.45 per common share, respectively.

Net income was $5.1 million and $11.5 million for the second fiscal quarter and six months ended March 31, 2006, respectively, as compared to net income of $7.5 million and $16.0 million for the second fiscal quarter and six months ended March 31, 2005, respectively. Net income per common share-diluted was $0.26 and $0.58 per common share for the second fiscal quarter and six months ended March 31, 2006, respectively, as compared to net income per common share-diluted of $0.40 and $0.85 per common share for the second fiscal quarter and six months ended March 31, 2005, respectively. Net income for the second fiscal quarter and six months ended March 31, 2005 includes $6.7 million and $13.8 million, respectively of discontinued operations, net of tax from Atlas America, Inc. (Nasdaq: ATLS), the Company’s former 80% owned subsidiary that was spun-off at June 30, 2005. Excluding the operations of Atlas America, net income per common share-diluted would have been $0.04 and $0.12 per common share for the second fiscal quarter and six months ended March 31, 2005, respectively.

Costs and expenses incurred in the second fiscal quarter and six months ended March 31, 2006 for compliance with the Sarbanes-Oxley Act of 2002 were $164,000 and $833,000, respectively, as compared to $300,000 and $420,000, respectively, in the second fiscal quarter and six months ended March 31, 2005. The Company’s depreciation and amortization expense also increased to $859,000 and $1.7 million in the second fiscal quarter and six months ended March 31, 2006, respectively, as compared to $425,000 and $803,000 in the second fiscal quarter and six months ended March 31, 2005, respectively. This expense relates principally to an increase in the avergage investment in operating lease assets of the Company’s equipment finance business.

In the second quarter of fiscal 2006, the Company was the prevailing party on an action against an insurance carrier which refused to participate in the Company’s 2002 settlement of a lawsuit. Included in other income (expense) in the three and six months ended March 31, 2006 is $1.2 million related to this matter.

The Company’s assets under management are as follows:

   
At March 31,
  
   
2006
  
2005
  
Financial fund management 
  
$
8.4 billion
(1)
$
3.7 billion
  
Real estate 
    
0.6 billion
    
0.5 billion
  
Equipment finance 
    
0.5 billion
    
0.2 billion
  
 
  
 $
 9.5 billion  
$
4.4 billion
  
(1)  
Includes assets under management of $1.3 billion on warehouse facilities for which the Company has been engaged as the collateral manager for CDOs not yet closed.

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 equipment 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, 2005.

For more information, please visit our website at www.resourceamerica.com or contact investor relations at pschreiber@resourceamerica.com.

 
 
 

Highlights for the Second Fiscal Quarter Ended March 31, 2006 and Recent Developments
 
CORPORATE:
 
®  
The Company increased its managed assets to $9.5 billion at March 31, 2006 from $4.4 billion (116%) at March 31, 2005. The Company expects to close two CDOs (of which $736.5 million are currently included in our assets under management) for which it has been engaged as the collateral manager by June 30, 2006, at which time the Company will begin to earn management fees on those assets.
 
®  
The Company increased its revenues from continuing operations to $20.6 million in the second fiscal quarter ended March 31, 2006, an increase of 85% as compared to the second fiscal quarter ended March 31, 2005.
 
®  
In the second fiscal quarter ended March 31, 2006, the Company purchased 265,495 shares of its common stock for $4.7 million under its current board authorization at an average price of $17.59. The Company’s cash position as of March 31, 2006 was $41.1 million.
 
®  
The Company announced the formation of Resource Europe Limited and Resource Europe Management Limited, a Financial Services Authority registered company, based in London, UK to manage European leveraged loans.
 
FINANCIAL FUND MANAGEMENT:
 
®  
Trapeza, the Company’s fund manager that invests in and manages trust preferred securities of banks, bank holding companies, insurance companies and REITs, increased its managed assets to $3.5 billion at March 31, 2006 from $2.6 billion (34%) at March 31, 2005.
 
®  
Ischus Capital Management, LLC, the Company’s wholly-owned subsidiary focusing on selecting, investing in and managing primarily real estate related asset-backed securities, increased its managed assets to $4.0 billion at March 31, 2006 from $1.0 billion (289%) at March 31, 2005.
 
®  
Apidos Capital Management, LLC, the Company’s wholly-owned subsidiary focusing on selecting, investing in and managing syndicated loans, increased its managed assets to $836.7 million at March 31, 2006 from $21.5 million at March 31, 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, increased its assets under management to $638.2 million as of March 31, 2006, an increase of $165.3 million (35%) from $472.9 million as of March 31, 2005.  Included in assets under management is $314.3 million of properties purchased for investment partnerships and investors, an increase of $171.1 million (119%) from March 31, 2005.
 
®  
Real estate revenues increased to $9.2 million in the second fiscal quarter ended March 31, 2006, an increase of $6.1 million (194%) from $3.1 million in the second fiscal quarter ended March 31, 2005.
 
®  
RRE sponsored five real estate investment limited partnerships, one currently in the offering stage, and three tenant-in-common offerings as of March 31, 2006.
 
®  
In the second fiscal quarter ended March 31, 2006, RRE resolved its loan investment in the Alex Brown Building and realized net cash proceeds of $19.9 million.
 
®  
RRE sold 19.99% of its 50% interest in an office building at 1845 Walnut Street in Philadelphia, PA and received cash of $4.0 million and a note receivable of $200,000, resulting in a gain of $4.2 million.

 
 
 
 
EQUIPMENT FINANCE:
 
®  
LEAF Financial Corporation (“LEAF”), the Company’s equipment finance fund manager, increased its assets under management to $469.7 million as of March 31, 2006, an increase of $216.4 million (85%) from March 31, 2005.
 
®  
LEAF’s lease originations increased to $93.6 million in the second fiscal quarter ended March 31, 2006, an increase of $13.7 million (17%) from the second fiscal quarter ended March 31, 2005.
 
®  
LEAF expanded its lease and loan origination capability and assets under management with the acquisition of the business of Unicyn Financial Companies.
 
®  
LEAF’s revenues increased to $5.5 million in the second fiscal quarter year ended March 31, 2006, an increase of $2.3 million (70%) from the second fiscal quarter ended March 31, 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 unaudited consolidated balance sheets, consolidated statements of income, consolidated statements of cash flows and a reconciliation of net cash (used in) or provided by 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)

   
March 31,
  
September 30,
  
   
2006
  
2005
  
   
(unaudited)
      
ASSETS
          
Current assets: 
          
Cash
  
$
41,083
  
$
30,353
  
Restricted cash
    
−
    
5,000
  
Investments in equipment finance
    
53,132
    
41,394
  
Accounts receivable
    
8,797
    
10,677
  
Receivables from managed entities
    
6,550
    
4,280
  
Prepaid expenses and other current assets
    
13,871
    
10,473
  
Assets held for sale
    
8,064
    
107,520
  
Total current assets
    
131,497
    
209,697
  
               
Loans held for investment - financial fund management 
    
−
    
97,752
  
Investments in real estate 
    
49,530
    
46,049
  
Investment in Resource Capital Corp. 
    
26,292
    
15,000
  
Investments in Trapeza entities 
    
12,224
    
10,457
  
Investments in financial fund management entities 
    
13,213
    
13,312
  
Property and equipment, net 
    
7,794
    
30,521
  
Other assets, net 
    
57,862
    
34,680
  
   
$
298,412
  
$
457,468
  
               
LIABILITIES AND STOCKHOLDERS’ EQUITY
              
Current liabilities:
              
Current portion of long-term debt
  
$
14,324
  
$
1,543
  
Secured warehouse credit facility - financial fund management
    
−
    
97,751
  
Secured warehouse credit facilities - equipment finance
    
39,229
    
30,942
  
Payables to managed entities 
    
7,767
    
591
  
Accounts payable, accrued expenses and other current liabilities 
    
18,051
    
19,797
  
Liabilities associated with assets held for sale 
    
5,010
    
74,438
  
Total current liabilities
    
84,381
    
225,062
  
               
Long-term debt 
    
2,291
    
17,066
  
               
Deferred revenue and other liabilities 
    
11,512
    
11,590
  
Minority interests 
    
10,243
    
16,614
  
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; 26,389,083 and 26,371,780 shares issued, respectively
    
264
    
264
  
Additional paid-in capital 
    
258,565
    
258,019
  
Less treasury stock, at cost; 8,783,520 and 8,312,760 shares, respectively 
    
(90,790
)
  
(82,556
)
Less ESOP loan receivable 
    
(477
)
  
(488
)
Accumulated other comprehensive income 
    
3,232
    
2,052
  
Retained earnings 
    
19,191
    
9,845
  
Total stockholders’ equity
    
189,985
    
187,136
  
   
$
298,412
  
$
457,468
  


 
 
 
RESOURCE AMERICA, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
(unaudited)

   
Three Months Ended
  
Six Months Ended
  
   
March 31,
  
March 31,
  
   
2006
  
2005
  
2006
  
2005
  
REVENUES
                  
Financial fund management
  
$
5,891
  
$
4,786
  
$
13,402
  
$
6,080
  
Real estate
    
9,206
    
3,135
    
13,860
    
5,269
  
Equipment finance
    
5,517
    
3,244
    
10,598
    
5,709
  
     
20,614
    
11,165
    
37,860
    
17,058
  
COSTS AND EXPENSES
                          
Financial fund management
    
2,693
    
2,648
    
4,893
    
3,280
  
Real estate
    
2,714
    
2,616
    
4,979
    
4,818
  
Equipment finance
    
3,553
    
2,324
    
6,471
    
4,509
  
General and administrative 
    
2,308
    
2,163
    
5,592
    
3,797
  
Depreciation and amortization
    
859
    
425
    
1,720
    
803
  
     
12,127
    
10,176
    
23,655
    
17,207
  
OPERATING INCOME (LOSS)
    
8,487
    
989
    
14,205
    
(149
)
                           
OTHER INCOME (EXPENSE)
                          
Interest expense
    
(1,346
)
  
(417
)
  
(3,619
)
  
(875
)
Minority interests
    
(369
)
  
(842
)
  
(771
)
  
(743
)
    Other income, net
    
1,962
    
281
    
2,835
    
3,478
  
     
247
    
(978
)
  
(1,555
)
  
1,860
  
Income from continuing operations before taxes 
    
8,734
    
11
    
12,650
    
1,711
  
Provision for income taxes
    
3,755
    
4
    
2,249
    
627
  
Income from continuing operations 
    
4,979
    
7
    
10,401
    
1,084
  
Income from discontinued operations, net of tax 
    
152
    
7,455
    
1,090
    
14,945
  
Net income 
  
$
5,131
  
$
7,462
  
$
11,491
  
$
16,029
  
                           
Net income per common share - basic:
                          
Continuing operations
  
$
0.28
  
$
0.00
  
$
0.58
  
$
0.06
  
Discontinued operations
    
0.01
    
0.43
    
0.06
    
0.86
  
Net income
  
$
0.29
  
$
0.43
  
$
0.64
  
$
0.92
  
Weighted average shares outstanding
    
17,740
    
17,526
    
17,898
    
17,516
  
                           
Net income per common share - diluted:
                          
Continuing operations
  
$
0.25
  
$
0.00
  
$
0.52
  
$
0.06
  
Discontinued operations
    
0.01
    
0.40
    
0.06
    
0.79
  
Net income
  
$
0.26
  
$
0.40
  
$
0.58
  
$
0.85
  
Weighted average shares outstanding
    
19,810
    
18,829
    
19,898
    
18,765
  
                           
Dividends declared per common share 
  
$
0.06
  
$
0.05
  
$
0.12
  
$
0.10
  

 
 
 

RESOURCE AMERICA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)

   
Six Months Ended
March 31,
  
   
2006
  
2005 (1)
  
CASH FLOWS FROM OPERATING ACTIVITIES:
          
Net income
  
$
11,491
  
$
16,029
  
Adjustments to reconcile net income to net cash used in operating activities:
              
Depreciation and amortization
    
1,720
    
803
  
Accretion of discount 
    
(514
)
  
(876
)
Collection of interest 
    
350
    
401
  
Provision for possible losses 
    
−
    
161
  
Equity in earnings of equity investees 
    
(4,437
)
  
(5,092
)
Minority interests 
    
771
    
743
  
Distributions paid to minority interest holders 
    
(783
)
  
(677
)
Gain from discontinued operations 
    
(1,090
)
  
(14,945
)
Gain on sale of RAIT Investment Trust shares 
    
−
    
(1,459
)
Gain on asset resolutions 
    
(5,991
)
  
(83
)
Deferred income tax provision 
    
1,154
    
3,043
  
Tax benefit from the exercise of stock options 
    
−
    
(138
)
Non-cash compensation on long-term incentive plans 
    
724
    
248
  
Non-cash compensation issued 
    
531
    
56
  
Non-cash compensation received 
    
(1,222
)
  
(205
)
Increase in net assets of FIN 46 entities’ and other assets held for sale 
    
(2
)
  
(155
)
Increase in equipment finance investments 
    
(12,415
)
  
(14,202
)
Changes in operating assets and liabilities 
    
(320
)
  
(3,357
)
Net cash used in operating activities of continuing operations 
    
(10,033
)
  
(19,705
)
CASH FLOWS FROM INVESTING ACTIVITIES:
              
Capital expenditures 
    
(1,550
)
  
(598
)
Purchase of loans held for investment - financial fund management 
    
(121,722
)
  
−
  
Payments received on real estate loans and real estate 
    
20,434
    
3,272
  
Investments in real estate 
    
(25,302
)
  
(3,336
)
Distributions from equity investees 
    
6,038
    
4,232
  
Investment in Resource Capital Corp 
    
(13,500
)
  
(15,000
)
Investments in financial fund management entities 
    
(14,925
)
  
(8,300
)
Proceeds from sale of financial fund management investment 
    
5,415
    
−
  
Proceeds from sale of RAIT Investment Trust shares 
    
−
    
2,924
  
Increase in other assets 
    
191
    
(834
)
Net cash used in investing activities of continuing operations 
    
(144,921
)
  
(17,640
)
CASH FLOWS FROM FINANCING ACTIVITIES:
              
Borrowings 
    
381,901
    
123,369
  
Principal payments on borrowings 
    
(237,929
)
  
(112,663
)
Dividends paid
    
(2,145
)
  
(1,754
)
Minority interest contributions 
    
1
    
3,650
  
Proceeds from issuance of stock 
    
79
    
868
  
Purchase of treasury stock 
    
(8,350
)
  
−
  
Net cash provided by financing activities of continuing operations 
    
133,557
    
13,470
  
Net cash retained by entities previously consolidated 
    
(3,825
)
  
−
  

 
 
 
RESOURCE AMERICA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS − (Continued)
(in thousands)
(unaudited)
 
   
Six Months Ended
March 31,
  
   
2006
  
2005 (1)
  
CASH FLOWS FROM DISCONTINUED OPERATIONS:
          
Operating activities 
    
−
    
7,653
  
Investing activities 
    
27,124
    
14,216
  
Financing activities 
    
8,828
    
−
  
Net cash provided by discontinued operations 
    
35,952
    
21,869
  
Increase (decrease) in cash 
    
10,730
    
(2,006
)
Cash at beginning of period 
    
30,353
    
39,907
  
Cash at end of period 
  
$
41,083
  
$
37,901
  
(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 $12.7 million for the six months ended March 31, 2006 as compared to $2.1 million for the six months ended March 31, 2005. The following reconciles net cash provided by continuing operations as adjusted to net cash (used in) operating activities of continuing operations for the six months ended March 31, 2006 and 2005, respectively (in thousands):

   
Three Months Ended
  
   
March 31,
  
   
2006
  
2005
  
Net cash (used in) operating activities of continuing operations 
  
$
(10,033
)
$
(19,705
)
               
Adjustments:
              
Increase in equipment finance investments
    
12,415
    
14,202
  
Changes in operating assets and liabilities
    
320
    
3,357
  
Distributions from equity investees
    
6,038
    
4,232
  
Cash proceeds from sale of a partial partnership interest in 1845 Walnut Street 
    
4,000
    
−
  
Net cash provided by operating activities of continuing operations, as adjusted
  
$
12,740
  
$
2,086