EX-99.1 2 rexipressrelease.htm REXI EARNINGS PR 063006 REXI Earnings PR 063006
 
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 THIRD FISCAL QUARTER ENDED JUNE 30, 2006

Philadelphia, PA August 2, 2006 - Resource America, Inc. (Nasdaq: REXI) (the "Company") reported income from continuing operations of $3.1 million and $13.4 million for the third fiscal quarter and nine months ended June 30, 2006, as compared to $3.5 million and $4.6 million for the third fiscal quarter and nine months ended June 30, 2005, a decrease of $398,000 and an increase of $8.8 million, respectively. Income from continuing operations per common share-diluted was $0.16 and $0.67 per common share for the third fiscal quarter and nine months ended June 30, 2006, as compared to income from continuing operations per common share-diluted of $0.19 and $0.24 per common share for the third fiscal quarter and nine months ended June 30, 2005. In the third fiscal quarter ended June 30, 2005, the Company recorded one time gains of $5.2 million related to the refinancing and foreclosure of two of its legacy real estate assets. Without these two items, income from continuing operations would have been $494,000 or $0.03 per common share diluted for the third fiscal quarter ended June 30, 2005.

Assets under management increased to $10.5 billion at June 30, 2006 from $5.7 billion at June 30, 2005, an increase of $4.7 billion (82%), as follows:

   
At June 30,
  
   
2006
  
2005
  
Financial fund management 
  
$
9.2 billion
(1)
$
4.9 billion
  
Real estate 
    
0.7 billion
    
0.5 billion
  
Equipment finance 
    
0.6 billion
    
0.3 billion
  
 
  
$
10.5 billion
  
$
5.7 billion
  
 
(1)  
Includes assets under management of $775.0 million 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 $5.7 million and $21.5 million for the third fiscal quarter and nine months ended June 30, 2006 as compared to $7.5 million and $8.1 million for the third fiscal quarter and nine months ended June 30, 2005, respectively, a decrease of $1.8 million and an increase $13.4 million, respectively. Operating income as adjusted and reflecting the one time gains discussed above would have been $2.3 million for the third fiscal quarter ended June 30, 2005.



The following reconciles operating income as adjusted to our operating income for the third fiscal quarter and nine months ended June 30, 2006 and 2005 (in thousands):

   
Three Months Ended
  
Nine Months Ended
  
   
June 30,
  
June 30,
  
   
2006
  
2005
  
2006
  
2005
  
Operating income
  
$
5,033
  
$
6,805
  
$
19,089
  
$
6,656
  
Plus:
                          
Depreciation and amortization
    
704
    
668
    
2,424
    
1,471
  
Operating income as adjusted
 
$
5,737
  
$
7,473
  
$
21,513
  
$
8,127
  

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 GAAP and, accordingly, should not be considered as a substitute for net income or cash flows from operating activities prepared in accordance with GAAP.

Net income was $3.0 million and $15.8 million for the third fiscal quarter and nine months ended June 30, 2006, respectively, as compared to net income of $1.6 million and $17.6 million for the third fiscal quarter and nine months ended June 30, 2005, respectively. Net income per common share-diluted was $0.15 and $0.79 per common share for the third fiscal quarter and nine months ended June 30, 2006, respectively, as compared to net income per common share-diluted of $0.09 and $0.93 per common share for the third fiscal quarter and nine months ended June 30, 2005, respectively.

Net income for the third fiscal quarter and nine months ended June 30, 2005 includes $2.9 million and $16.6 million, respectively, of income from 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 (loss) income per common share-diluted would have been ($0.07) and $0.05 per common share for the third fiscal quarter and nine months ended June 30, 2005, respectively, as compared to net income per common share-diluted for the third fiscal quarter and nine months ended June 30, 2006 of $0.15 and $0.79, respectively.

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 Third Fiscal Quarter Ended June 30, 2006 and Recent Developments
 
CORPORATE:
 
®  
The Company increased its managed assets to $10.5 billion at June 30, 2006 from $5.7 billion at June 30, 2005 an increase of $4.7 billion (82%). The Company expects to close one CDO in the fourth quarter of fiscal 2006 (of which $128.5 million is currently included in our assets under management) for which it has been engaged as the collateral manager, at which time the Company will begin to earn management fees on those assets.
 
®  
In the third fiscal quarter ended June 30, 2006, the Company purchased 277,414 shares of its common stock for $5.1 million under its current board authorization at an average price of $18.41. The Company’s cash position as of June 30, 2006 was $29.2 million.
 
®  
The Company extended its revolving line of credit with Sovereign Bank at $14.0 million for a three year period.
 
FINANCIAL FUND MANAGEMENT:
 
®  
Financial fund management segment increased its revenues to $7.4 million at June 30, 2006 from $4.8 million (53%) at June 30, 2005.
 
®  
Trapeza Capital 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 $3.8 billion at June 30, 2006 from $2.6 billion (44%) at June 30, 2005.
 
®  
Ischus Capital Management, LLC (“Ischus”), 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 $4.2 billion at June 30, 2006 from $2.1 billion (97%) at June 30, 2005.
 
®  
Apidos Capital Management, LLC (“Apidos”), the Company’s wholly-owned subsidiary focusing on selecting, investing in and managing syndicated loans, increased its managed assets to $1.2 billion at June 30, 2006 from $189.0 million (516%) at June 30, 2005.
 
®  
Trapeza closed Trapeza X, a $500.0 million CDO.
 
®  
Ischus closed Ischus Mezzanine III, a $600.0 million CDO.
 
®  
Apidos closed Apidos III, a $280.0 million CLO, on behalf of Resource Capital Corp.
 
®  
The Company formed Resource Europe Limited and Resource Europe Management Limited based in London, UK, to manage a portfolio of European leveraged loans. The Company hired Rob Reynolds and four other professionals to manage and develop these operations and opened an office in London, UK.
 
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 $707.3 million as of June 30, 2006, an increase of $200.5 million (40%) from $506.8 million as of June 30, 2005.  Included in assets under management are $314.3 million of properties purchased for investment partnerships and investors, an increase of $139.5 million (80%) from June 30, 2005.
 
®  
RRE increased its management of commercial real estate mezzanine loans and B notes to $293.0 million from $25.0 million, an increase of $268.0 million.
 
®  
RRE closed its latest limited partnership, Resource Real Estate Investors III, with $25.0 million of capital.
 
®  
Kyle Geoghegan and Darryl Myrose joined Resource Real Estate Funding, Inc. (“RREF”), an indirect wholly-owned subsidiary of the Company, as Managing Directors in the Los Angeles office. At RREF, Mr. Geoghegan and Mr. Myrose will focus on the direct origination of floating rate commercial mortgages for Resource Capital Corp.
 
EQUIPMENT FINANCE:
 
®  
LEAF Financial Corporation (“LEAF”), the Company’s equipment finance fund manager, increased its assets under management to $549.4 million as of June 30, 2006, an increase of $258.7 million (89%) from June 30, 2005.
 
®  
LEAF’s lease originations increased to $117.7 million in the third fiscal quarter ended June 30, 2006, an increase of $60.9 million (107%) from the third fiscal quarter ended June 30, 2005.
 
®  
LEAF’s revenues increased to $5.9 million in the third fiscal quarter ended June 30, 2006, an increase of $2.4 million (69%) from the third fiscal quarter ended June 30, 2005.
 
®  
Subsequent to the end of the third fiscal quarter of 2006, LEAF entered into a three year $150.0 million syndicated bank warehouse revolving credit facility. National City Bank acted as agent for the bank group.
 

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)

   
June 30,
  
September 30,
  
   
2006
  
2005
  
   
(unaudited)
      
ASSETS
          
Current assets: 
          
Cash
  
$
24,223
  
$
30,353
  
Restricted cash
    
5,002
    
5,000
  
Investments in equipment finance
    
90,006
    
41,394
  
Accounts receivable
    
10,933
    
10,677
  
Receivables from managed entities
    
8,357
    
4,280
  
Prepaid expenses and other current assets
    
18,954
    
10,473
  
Assets held for sale
    
1,306
    
107,520
  
Total current assets
    
158,781
    
209,697
  
               
Loans held for investment - financial fund management 
    
170,636
    
97,752
  
Investments in real estate 
    
52,182
    
46,049
  
Investment in Resource Capital Corp. 
    
24,629
    
15,000
  
Investments in Trapeza entities 
    
14,497
    
10,457
  
Investments in financial fund management entities 
    
13,052
    
13,312
  
Property and equipment, net 
    
9,744
    
30,521
  
Other assets, net 
    
54,410
    
34,680
  
   
$
497,931
  
$
457,468
  
               
LIABILITIES AND STOCKHOLDERS’ EQUITY
              
Current liabilities:
              
Current portion of long-term debt
  
$
3,247
  
$
1,543
  
Secured warehouse credit facilities - financial fund management
    
168,050
    
97,751
  
Secured warehouse credit facilities - equipment finance
    
74,721
    
30,942
  
Payables to managed entities 
    
1,916
    
591
  
Accounts payable, accrued expenses and other current liabilities 
    
22,547
    
19,797
  
Liabilities associated with assets held for sale 
    
1,148
    
74,438
  
Total current liabilities
    
271,629
    
225,062
  
               
Long-term debt 
    
15,865
    
17,066
  
               
Deferred revenue and other liabilities 
    
12,465
    
11,590
  
Minority interests 
    
10,168
    
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; 26,400,647 and 26,371,780 shares issued, respectively
    
264
    
264
  
Additional paid-in capital 
    
259,051
    
258,019
  
Retained earnings 
    
22,401
    
9,845
  
Treasury stock, at cost; 9,054,731 and 8,312,760 shares, respectively 
    
(95,834
)
  
(82,556
)
ESOP loan receivable 
    
(471
)
  
(488
)
Accumulated other comprehensive income 
    
2,393
    
2,052
  
Total stockholders’ equity
    
187,804
    
187,136
  
   
$
497,931
  
$
457,468
  


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


   
Three Months Ended
  
Nine Months Ended
  
   
June 30,
  
June 30,
  
   
2006
  
2005
  
2006
  
2005
  
REVENUES
                  
Financial fund management
  
$
7,376
  
$
4,828
  
$
20,629
  
$
10,908
  
Real estate
    
4,500
    
9,269
    
18,360
    
14,538
  
Equipment finance
    
5,885
    
3,481
    
16,483
    
9,190
  
     
17,761
    
17,578
    
55,472
    
34,636
  
COSTS AND EXPENSES
                          
Financial fund management
    
2,402
    
2,572
    
7,295
    
5,852
  
Real estate
    
3,286
    
3,224
    
8,265
    
8,042
  
Equipment finance
    
3,911
    
2,467
    
10,382
    
6,976
  
General and administrative 
    
2,425
    
1,842
    
8,017
    
5,639
  
Depreciation and amortization
    
704
    
668
    
2,424
    
1,471
  
     
12,728
    
10,773
    
36,383
    
27,980
  
OPERATING INCOME
    
5,033
    
6,805
    
19,089
    
6,656
  
                           
OTHER INCOME (EXPENSE)
                          
Interest expense
    
(1,871
)
  
(648
)
  
(5,490
)
  
(1,523
)
Minority interests
    
(465
)
  
(415
)
  
(1,236
)
  
(1,158
)
Other income, net
    
809
    
310
    
3,644
    
3,788
  
     
(1,527
)
  
(753
)
  
(3,082
)
  
1,107
  
Income from continuing operations before taxes and cumulative effect of accounting change
    
3,506
    
6,052
    
16,007
    
7,763
  
Provision for income taxes
    
393
    
2,541
    
2,579
    
3,168
  
Income from continuing operations before cumulative effect of accounting change
    
3,113
    
3,511
    
13,428
    
4,595
  
(Loss) income from discontinued operations, net of tax 
    
(113
)
  
(1,901
)
  
977
    
13,044
  
Cumulative effect of accounting change, net of tax 
    
−
    
−
    
1,357
    
−
  
Net income 
  
$
3,000
  
$
1,610
  
$
15,762
  
$
17,639
  
                           
Basic earnings (loss) per common share:
                          
Continuing operations
  
$
0.18
  
$
0.20
  
$
0.76
  
$
0.26
  
Discontinued operations
    
(0.01
)
  
(0.11
)
  
0.05
    
0.74
  
Cumulative effect of accounting change
    
−
    
−
    
0.08
    
−
  
Net income
  
$
0.17
  
$
0.09
  
$
0.89
  
$
1.00
  
Weighted average shares outstanding
    
17,536
    
17,716
    
17,727
    
17,582
  
                           
Diluted earnings (loss) per common share:
                          
Continuing operations
  
$
0.16
  
$
0.19
  
$
0.67
  
$
0.24
  
Discontinued operations
    
(0.01
)
  
(0.10
)
  
0.05
    
0.69
  
Cumulative effect of accounting change
    
−
    
−
    
0.07
    
−
  
Net income
  
$
0.15
  
$
0.09
  
$
0.79
  
$
0.93
  
Weighted average shares outstanding
    
19,744
    
18,926
    
19,796
    
18,819
  
                           
Dividends declared per common share 
  
$
0.06
  
$
0.05
  
$
0.18
  
$
0.15
  


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

   
Nine Months Ended
June 30,
  
   
2006
  
2005
  
CASH FLOWS FROM OPERATING ACTIVITIES:
          
Net income
  
$
15,762
  
$
17,639
  
Adjustments to reconcile net income to net cash used in operating activities:
              
Cumulative effect of accounting change, net of tax
    
(1,357
)
  
−
  
Depreciation and amortization
    
2,424
    
1,471
  
Equity in earnings of equity investees 
    
(6,497
)
  
(7,417
)
Minority interest earnings 
    
1,236
    
1,158
  
Distributions paid to minority holders 
    
(1,274
)
  
(1,136
)
Gain from discontinued operations 
    
(977
)
  
(13,044
)
Gain on sale of RAIT Investment Trust shares 
    
−
    
(1,459
)
Gain on asset resolutions 
    
(7,252
)
  
(5,467
)
Deferred income tax provision 
    
1,981
    
3,921
  
Non-cash compensation on long-term incentive plans 
    
1,346
    
375
  
Non-cash compensation issued 
    
1,614
    
405
  
Non-cash compensation received 
    
(1,259
)
  
(1,018
)
Increase in net assets of FIN 46 entities’ and other assets held for sale 
    
−
    
(3,461
)
Increase in equipment finance investments 
    
(49,444
)
  
(31,163
)
Changes in operating assets and liabilities 
    
(13,460
)
  
(12,130
)
Net cash used in operating activities of continuing operations 
    
(57,157
)
  
(51,326
)
CASH FLOWS FROM INVESTING ACTIVITIES:
              
Capital expenditures 
    
(3,674
)
  
(1,474
)
Payments received on real estate loans and real estate 
    
30,623
    
4,848
  
Investments in real estate 
    
(32,531
)
  
(3,552
)
Distributions from equity investees 
    
9,824
    
20,809
  
Purchase of loans held for investment - financial fund management 
    
(317,597
)
  
−
  
Principal payments on loans held for investment 
    
6,702
    
−
  
Proceeds from sale of loans held for investment 
    
18,821
    
1,950
  
Investments in managed entities 
    
(20,880
)
  
(8,300
)
Investments in Resource Capital Corp 
    
(13,500
)
  
(15,000
)
Proceeds from sale of investments 
    
5,415
    
2,924
  
Decrease in other assets 
    
(1,676
)
  
(204
)
Net cash (used in) provided by investing activities of  continuing operations 
    
(318,473
)
  
2,001
  
CASH FLOWS FROM FINANCING ACTIVITIES:
              
Borrowings 
    
686,934
    
182,987
  
Principal payments on borrowings 
    
(336,925
)
  
(159,355
)
Purchase of treasury stock 
    
(13,458
)
  
−
  
Investor contributions to financial fund management investments 
    
−
    
3,651
  
Dividends paid
    
(3,206
)
  
(2,632
)
Proceeds from issuance of stock 
    
125
    
4,735
  
Net cash provided by financing activities of continuing operations 
    
333,470
    
29,386
  
Net cash provided by discontinued operations 
    
39,855
    
22,915
  
Net cash retained by entities previously consolidated 
    
(3,825
)
  
(29,192
)
Decrease in cash 
    
(6,130
)
  
(26,216
)
Cash at beginning of period 
    
30,353
    
69,099
  
Cash at end of period 
  
$
24,223
  
$
42,883
  
 
 
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 $19.6 million for the nine months ended June 30, 2006 an increase of $6.8 million (53%) as compared to $12.8 million for the nine months ended June 30, 2005. The following reconciles net cash provided by continuing operations as adjusted to net cash (used in) operating activities of continuing operations for the nine months ended June 30, 2006 and 2005, respectively (in thousands):

   
Nine Months Ended
  
   
June 30,
  
   
2006
  
2005
  
Net cash (used in) operating activities of continuing operations 
  
$
(57,157
)
$
(51,326
)
               
Adjustments:
              
Increase in equipment finance investments
    
49,444
    
31,163
  
Changes in operating assets and liabilities
    
13,460
    
12,130
  
Distributions from equity investees
    
9,824
    
20,809
  
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
  
$
19,571
  
$
12,776