EX-99.1 2 raiearningspr.htm RAI EARNINGS PRESS RELEASE, DATED MAY 1, 2007 RAI Earnings Press Release, dated May 1, 2007
 
FOR IMMEDIATE RELEASE

CONTACT:           STEVEN KESSLER
CHIEF FINANCIAL OFFICER
RESOURCE AMERICA, INC.
ONE CRESCENT DRIVE, SUITE 203
PHILADELPHIA, PA 19112
215/546-5005, 215/546-4785 (fax)
 
RESOURCE AMERICA, INC.
REPORTS OPERATING RESULTS
FOR SECOND FISCAL QUARTER ENDED MARCH 31, 2007

Philadelphia, PA, May 1, 2007 - Resource America, Inc. (Nasdaq: REXI) (the "Company") reported second fiscal quarter ended March 31, 2007 revenues of $31.6 million, operating income of $15.0 million, income from continuing operations before income taxes of $8.4 million, and income from continuing operations and net income of $5.4 million, or $0.29 per common share-diluted.

Assets under management increased to $14.7 billion at March 31, 2007 from $9.5 billion at March 31, 2006, an increase of $5.2 billion (54%). As of April 30, 2007, the Company’s assets under management had increased to $15.0 billion.

The following table details assets under management by operating segment:

   
At March 31,
  
   
2007
  
2006
  
Financial fund management 
  
$
12.7 billion
(1)
$
8.4 billion
  
Real estate 
    
1.3 billion
(1)
  
0.6 billion
  
Commercial finance 
    
0.7 billion
    
0.5 billion
  
 
  
$ 
 14.7 billion  
$
9.5 billion
  
(1)  
Includes assets under management of $2.0 billion at March 31, 2007 on warehouse facilities for which the Company has been engaged as the collateral manager for CDOs not yet closed.

For the second fiscal quarter ended March 31, 2006, the Company had revenues of $20.5 million, operating income of $8.4 million, income from continuing operations before income taxes and cumulative effect of a change in accounting principle of $8.7 million, income from continuing operations before cumulative effect of a change in accounting principle of $4.9 million, or $0.26 per common share-diluted, and net income of $5.1 million, or $0.27 per common share-diluted.
Operating income as adjusted, before depreciation and amortization, was $15.7 million and $25.7 million for the second fiscal quarter and six months ended March 31, 2007, as compared to $9.3 million and $15.8 million for the second fiscal quarter and six months ended March 31, 2006, an increase of $6.4 million and $9.9 million, respectively. The following reconciles operating income as adjusted to operating income (in thousands):

 
   
Three Months Ended
  
Six Months Ended
  
   
March 31,
  
March 31,
  
   
2007
  
2006
  
2007
  
2006
  
Operating income
  
$
14,973
  
$
8,433
  
$
24,274
  
$
14,102
  
Plus:
                          
Depreciation and amortization
    
719
    
836
    
1,428
    
1,674
  
Operating income as adjusted
  
$
15,692
  
$
9,269
  
$
25,702
  
$
15,776
  

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 Annual Report on 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 Second Fiscal Quarter Ended March 31, 2007 and Recent Developments
 
CORPORATE:
 
®  
The Company increased its book value per share to $11.49 at March 31, 2007 from $11.17 at September 30, 2006.
 
®  
Resource Capital Corp. (“RCC”), a real estate investment trust managed by the Company and in which the Company owns approximately 1.9 million common shares, declared a cash dividend of $0.39 per common share for the quarter ended March 31, 2007.
 
®  
The Company’s Board of Directors 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.
 
FINANCIAL FUND MANAGEMENT:
 
®  
The Company’s financial fund management operating segment increased its assets under management at March 31, 2007 to $12.7 billion, an increase of $4.3 billion (51%) from March 31, 2006.
 
®  
During the period from January 2007 through April 30, 2007, the Company closed or priced four CDO transactions that will finance a total of $1.7 billion of assets. The Company closed Trapeza CDO XII, Ltd. and Apidos CDO V financing a total of $918.0 million of trust preferred securities and bank loans. In addition, the Company priced Resource Europe CLO I B.V., its first European collateralized loan obligation (“CLO”), financing EUR 300.0 million of predominately western European secured leveraged loans and Apidos Cinco CDO a $350.0 million transaction that will be managed by Apidos on behalf of RCC.
 
®  
Financial fund management revenues increased by $10.2 million (176%) to $16.0 million for the second fiscal quarter ended March 31, 2007 from $5.8 million for the second fiscal quarter ended March 31, 2006.
 
®  
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 $2.5 billion at March 31, 2007 from $829.0 million at March 31, 2006.
 
®  
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 March 31, 2007 from $4.0 billion at March 31, 2006.
 
®  
Trapeza Capital Management (“Trapeza”), the Company’s joint venture 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 $4.7 billion at March 31, 2007 from $3.5 billion at March 31, 2006.
 
®  
Resource Europe Management (“Resource Europe”), the Company’s European bank loan asset manager, increased its managed assets to $403.0 million at March 31, 2007 from $91.3 million at September 30, 2006. Resource Europe began acquiring loans during the quarter ended September 30, 2006.
 
®  
In March 2007, the Company formed Coredo Capital Management, LLC to focus on originating, structuring and managing trust preferred securities of real estate investment trusts (“REITs”) and real estate operating companies (“REOCs”).

REAL ESTATE:
 
®  
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 operates the Company’s commercial real estate debt platform, increased its assets under management to $1.3 billion at March 31, 2007, an increase of $614.0 million (96%) from March 31, 2006.
 
®  
RRE acquired two properties during the three months ended March 31, 2007, with an aggregate purchase price of $15.7 million.
 
COMMERCIAL FINANCE:
 
®  
LEAF Financial Corporation (“LEAF”), the Company’s commercial finance asset manager, increased its commercial finance originations to $129.9 million for the second fiscal quarter ended March 31, 2007, an increase of $36.3 million (39%) from the second fiscal quarter ended March 31, 2006.
 
®  
Commercial finance assets under management increased to $737.0 million at March 31, 2007, an increase of $267.0 million (57%) from March 31, 2006.
 
®  
Commercial finance revenues increased to $8.6 million for the second fiscal quarter ended March 31, 2007 from $5.5 million (55%) for the second fiscal quarter ended March 31, 2006.
 
®  
LEAF launched Merit Capital Advance, a new line of business to provide capital to small businesses by advancing cash against future credit card receipts.
 
®  
LEAF commenced its $120.0 million offering of LEAF Equipment Leasing Income Fund III, its third publicly offered commercial finance fund. As of April 30, 2007, LEAF has raised $19.5 million for LEAF III.
 
®  
Robert J. Hunter was hired by LEAF as its Executive Vice President and Chief Marketing Officer in February, 2007.  Mr. Hunter has over 20 years experience in the leasing business. Prior to joining LEAF, Mr. Hunter was the SVP of Business Development and Marketing with Citicorp Vendor Finance, the equipment leasing and finance business unit of Citigroup.
 
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 unaudited consolidated balance sheets, consolidated statements of income, consolidated statements of cash flows 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)

   
March 31, 2007
  
September 30, 2006
  
   
(unaudited)
      
ASSETS
          
Cash
  
$
18,199
  
$
37,622
  
Restricted cash
    
17,072
    
8,103
  
Receivables
    
33,839
    
2,312
  
Receivables from managed entities
    
14,132
    
8,795
  
Investments in commercial finance
    
200,908
    
108,850
  
Loans held for investment
    
495,275
    
69,314
  
Investments in real estate
    
49,505
    
50,104
  
Investment securities available-for-sale
    
66,721
    
64,857
  
Investments in unconsolidated entities
    
32,383
    
26,626
  
Property and equipment, net
    
9,918
    
9,525
  
Deferred income taxes
    
8,470
    
6,408
  
Other assets
    
32,130
    
24,237
  
Total assets
  
$
978,552
  
$
416,753
  
               
LIABILITIES AND STOCKHOLDERS’ EQUITY
              
Accounts payable, accrued expenses and other liabilities
  
$
65,955
  
$
29,526
  
Payables to managed entities
    
875
    
1,579
  
Borrowings
    
692,441
    
172,238
  
Deferred income tax liabilities 
    
8,207
    
10,746
  
Minority interests 
    
8,782
    
9,602
  
Total liabilities
    
776,260
    
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; 26,702,748
and 26,401,708 shares issued, respectively
    
267
    
264
  
Additional paid-in capital 
    
263,848
    
259,882
  
Retained earnings 
    
33,009
    
25,464
  
Treasury stock, at cost; 9,095,244 and 9,110,290 shares, respectively 
    
(96,799
)
  
(96,960
)
ESOP loan receivable 
    
(453
)
  
(465
)
Accumulated other comprehensive income 
    
2,420
    
4,877
  
Total stockholders’ equity
    
202,292
    
193,062
  
   
$
978,552
  
$
416,753
  

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

   
Three Months Ended
  
Six Months Ended
  
   
March 31,
  
March 31,
  
   
2007
  
2006
  
2007
  
2006
  
REVENUES
                  
Financial fund management 
  
$
16,030
  
$
5,814
  
$
28,417
  
$
13,293
  
Real estate 
    
7,008
    
9,206
    
11,572
    
13,860
  
Commercial finance 
    
8,564
    
5,517
    
15,653
    
10,598
  
     
31,602
    
20,537
    
55,642
    
37,751
  
COSTS AND EXPENSES
                          
Financial fund management 
    
5,401
    
2,765
    
9,953
    
5,064
  
Real estate 
    
3,195
    
2,714
    
6,208
    
4,979
  
Commercial finance 
    
4,560
    
3,553
    
8,191
    
6,471
  
General and administrative 
    
2,754
    
2,236
    
5,588
    
5,461
  
Depreciation and amortization 
    
719
    
836
    
1,428
    
1,674
  
     
16,629
    
12,104
    
31,368
    
23,649
  
OPERATING INCOME
    
14,973
    
8,433
    
24,274
    
14,102
  
                           
OTHER INCOME (EXPENSE)
                          
Interest expense 
    
(7,694
)
  
(1,369
)
  
(12,285
)
  
(3,665
)
Minority interests 
    
(715
)
  
(369
)
  
(1,275
)
  
(771
)
Other income, net 
    
1,811
    
1,962
    
4,339
    
2,835
  
     
(6,598
)
  
224
    
(9,221
)
  
(1,601
)
Income from continuing operations before income taxes
and cumulative effect of a change in accounting principle
    
8,375
    
8,657
    
15,053
    
12,501
  
Provision for income taxes
    
2,955
    
3,723
    
5,165
    
2,186
  
Income from continuing operations before cumulative
effect of a change in accounting principle
    
5,420
    
4,934
    
9,888
    
10,315
  
(Loss) income from discontinued operations, net of tax 
    
(37
)
  
152
    
(56
)
  
1,090
  
Cumulative effect of a change in accounting principle, net of tax 
    
−
    
−
    
−
    
1,357
  
Net income 
  
$
5,383
  
$
5,086
  
$
9,832
  
$
12,762
  
                           
Basic earnings per common share:
                          
Continuing operations 
  
$
0.31
  
$
0.28
  
$
0.57
  
$
0.57
  
Discontinued operations 
    
−
    
0.01
    
−
    
0.06
  
Cumulative effect of accounting change 
    
−
    
−
    
−
    
0.08
  
Net income 
  
$
0.31
  
$
0.29
  
$
0.57
  
$
0.71
  
Weighted average shares outstanding 
    
17,242
    
17,606
    
17,267
    
17,822
  
                           
Diluted earnings per common share:
                          
Continuing operations 
  
$
0.29
  
$
0.26
  
$
0.52
  
$
0.53
  
Discontinued operations 
    
−
    
0.01
    
−
    
0.06
  
Cumulative effect of accounting change 
    
−
    
−
    
−
    
0.07
  
Net income 
  
$
0.29
  
$
0.27
  
$
0.52
  
$
0.66
  
Weighted average shares outstanding 
    
19,027
    
19,069
    
19,074
    
19,232
  
                           
Dividends declared per common share 
  
$
0.07
  
$
0.06
  
$
0.13
  
$
0.12
  

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

   
Six Months Ended
March 31,
  
   
2007
  
2006
  
CASH FLOWS FROM OPERATING ACTIVITIES:
          
Net income
  
$
9,832
  
$
12,762
  
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
    
1,721
    
1,674
  
Equity in earnings of unconsolidated entities 
    
(7,926
)
  
(4,287
)
Minority interests 
    
1,275
    
771
  
Distributions from unconsolidated entities 
    
7,852
    
6,038
  
Loss (income) from discontinued operations 
    
56
    
(1,090
)
Gain on sale of assets 
    
(5,307
)
  
(6,016
)
Deferred income tax (benefit) provision 
    
(4,023
)
  
1,154
  
Non-cash compensation on long-term incentive plans 
    
1,316
    
724
  
Non-cash compensation issued 
    
139
    
531
  
Non-cash compensation received 
    
(361
)
  
(1,222
)
Increase in commercial finance investments 
    
(92,246
)
  
(12,415
)
Changes in operating assets and liabilities 
    
(5,222
)
  
(5,354
)
Net cash used in operating activities of continuing operations 
    
(92,894
)
  
(8,087
)
CASH FLOWS FROM INVESTING ACTIVITIES:
              
Capital expenditures 
    
(1,494
)
  
(1,550
)
Payments received on real estate loans and real estate 
    
8,401
    
20,434
  
Investments in real estate 
    
(10,163
)
  
(25,302
)
Purchase of investments 
    
(9,881
)
  
(28,575
)
Proceeds from sale of investments 
    
4,694
    
5,415
  
(Increase) decrease in restricted cash 
    
(8,969
)
  
5,000
  
(Increase) decrease in other assets 
    
(1,775
)
  
191
  
Net cash used in investing activities of continuing operations 
    
(19,187
)
  
(24,387
)
CASH FLOWS FROM FINANCING ACTIVITIES:
              
Increase in borrowings 
    
356,944
    
260,204
  
Principal payments on borrowings 
    
(262,651
)
  
(237,928
)
Dividends paid
    
(2,287
)
  
(2,145
)
Distributions paid to minority interest holders 
    
(968
)
  
(783
)
Proceeds from issuance of stock 
    
927
    
79
  
Purchase of treasury stock 
    
−
    
(8,350
)
Tax benefit from the exercise of stock options 
    
1,887
    
−
  
Net cash provided by financing activities of continuing operations 
    
93,852
    
11,077
  
Net cash retained by entities previously consolidated 
    
−
    
(3,825
)
CASH FLOWS FROM DISCONTINUED OPERATIONS:
              
Operating activities 
    
(49
)
  
8,828
  
Investing activities 
    
−
    
27,124
  
Financing activities 
    
(1,145
)
  
−
  
Net cash (used in) provided by discontinued operations 
    
(1,194
)
  
35,952
  
(Decrease) increase in cash 
    
(19,423
)
  
10,730
  
Cash at beginning of period 
    
37,622
    
30,353
  
Cash at end of period 
  
$
18,199
  
$
41,083
  

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 $10.8 million for the six months ended March 31, 2007 as compared to $13.7 million for the six months ended March 31, 2006. The following reconciles net cash provided by operating activities of continuing operations as adjusted to net cash used in operating activities of continuing operations (in thousands):

   
Six Months Ended
  
   
March 31,
  
   
2007
  
2006
  
Net cash used in operating activities of continuing operations 
  
$
(92,894
)
$
(8,087
)
               
Adjustments:
              
Increase in commercial finance investments
    
92,246
    
12,415
  
Changes in operating assets and liabilities
    
5,222
    
5,354
  
Proceeds from sale of a partial partnership interest and an investment 
    
6,268
    
4,000
  
Net cash provided by operating activities of continuing operations, as adjusted
  
$
10,842
  
$
13,682