-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, U+E2lM8tHmjyBT1+C8A/u8KGbSklMAMu9u5UIsJlpGmtXUnbNWFbPRc1k6dXB4X0 XeNVlBnkeXlizLqDsLxyrQ== 0000950116-99-000790.txt : 19990421 0000950116-99-000790.hdr.sgml : 19990421 ACCESSION NUMBER: 0000950116-99-000790 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990204 ITEM INFORMATION: FILED AS OF DATE: 19990420 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RESOURCE AMERICA INC CENTRAL INDEX KEY: 0000083402 STANDARD INDUSTRIAL CLASSIFICATION: INVESTMENT ADVICE [6282] IRS NUMBER: 720654145 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 000-04408 FILM NUMBER: 99597740 BUSINESS ADDRESS: STREET 1: 1521 LOCUST ST STREET 2: 4TH FL CITY: PHILADELPHIA STATE: PA ZIP: 19102 BUSINESS PHONE: 2155465005 MAIL ADDRESS: STREET 1: 2876 SOUTH ARLINGTON ROAD CITY: AKRON STATE: OH ZIP: 44312 FORMER COMPANY: FORMER CONFORMED NAME: RESOURCE EXPLORATION INC DATE OF NAME CHANGE: 19890214 FORMER COMPANY: FORMER CONFORMED NAME: SMTR CORP DATE OF NAME CHANGE: 19700522 8-K/A 1 FORM 8-K/A SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K/A CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) February 4, 1999 --------------------------------- Resource America, Inc. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 0-4408 72-0654145 - -------------------------------------------------------------------------------- (State or other jurisdiction (Commission (IRS Employer incorporation) File Number) Identification No.) 1521 Locust Street, 4th Floor, Philadelphia, Pennyslvania 19102 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (215) 546-5005 ----------------------------- Item 7. Financial Statements, Pro Forma Financial Information and Exhibits (a) Financial statements of business acquired (i) Financial statements of business acquired for the year ended December 31, 1998 Independent Auditors' Report Consolidated Balance Sheet . Consolidated Statement of Earnings and Retained Earnings Consolidated Statement of Cash Flows Notes to Consolidated Financial Statements (ii) Financial Statements of business acquired for the year ended December 31, 1997 Report of Public Accountants Consolidated Balance Sheets . Consolidated Statements of Operations and Retained Earnings Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements (b) Unaudited Pro Forma Financial Information Pro Forma Combined Consolidated Balance Sheet at December 31, 1998 Pro Forma Combined Consolidated Statement of Operations for the three months ended December 31, 1998 Pro Forma Combined Consolidated Statement of Operations for the years ended September 30, 1998 and December 31, 1998 Notes to Pro Forma Combined Consolidated Financial Statements SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. RESOURCE AMERICA, INC. -------------------------------- (Registrant) Dated: April 19, 1999 By: /s/Steven J. Kessler -------------------- ----------------------------- Steven J. Kessler Senior Vice President and Chief Financial Officer CONSOLIDATED FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS JLA CREDIT CORPORATION AND SUBSIDIARIES December 31, 1998 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Board of Directors JLA Credit Corporation We have audited the accompanying consolidated balance sheet of JLA Credit Corporation (a Delaware corporation) and Subsidiaries as of December 31, 1998, and the related consolidated statements of earnings and retained earnings, and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of JLA Credit Corporation and Subsidiaries as of December 31, 1998, and the consolidated results of their operations and their consolidated cash flows for the year then ended in conformity with generally accepted accounting principles. San Francisco, California April 9, 1999 JLA Credit Corporation and Subsidiaries CONSOLIDATED BALANCE SHEET December 31, 1998
ASSETS Cash and cash equivalents $ 28,462,252 Investment in direct financing leases, net 312,139,555 Other assets 16,378,076 ------------ Total assets $356,979,883 ============ LIABILITIES AND SHAREHOLDER'S EQUITY Liabilities Borrowings from banks $154,015,000 Asset backed borrowing 140,124,909 Accrued interest 833,537 Due to parent 11,944,554 Other liabilities 11,697,917 ------------ Total liabilities 318,615,917 Commitments and contingencies Shareholder's equity Common stock, par value $500 per share; 64,000 shares authorized, 60,000 shares issued and outstanding 30,000,000 Additional paid-in capital 250,375 Retained earnings 8,113,591 ------------ Total shareholder's equity 38,363,966 ============ Total liabilities and shareholder's equity $356,979,883 ============
The accompanying notes are an integral part of this statement. JLA Credit Corporation and Subsidiaries CONSOLIDATED STATEMENT OF EARNINGS AND RETAINED EARNINGS Year ended December 31, 1998 Revenues Earned income on direct financing leases $29,516,605 Interest income 2,538,238 Other income 3,435,590 ----------- Total revenues 35,490,433 Expenses Interest expense 20,609,830 Provision for doubtful receivables 3,268,935 General and administrative expenses 9,261,702 ----------- Total expenses 33,140,467 ----------- Income before provision for income taxes 2,349,966 Provision for income taxes 1,036,647 ----------- NET EARNINGS 1,313,319 Retained earnings at beginning of year 6,800,272 ----------- Retained earnings at end of year $ 8,113,591 =========== The accompanying notes are an integral part of this statement. JLA Credit Corporation and Subsidiaries CONSOLIDATED STATEMENT OF CASH FLOWS Year ended December 31, 1998
Cash flows from operating activities Net earnings $ 1,313,319 Adjustments to reconcile net income to net cash used in operating activities Depreciation and amortization 802,434 Provision for doubtful receivables 3,268,935 Gain on sale of direct financing leases (1,850,873) Changes in assets and liabilities Other assets (7,978,458) Accrued interest (1,648,181) Other liabilities (222,088) ------------- Net cash used in operating activities (6,314,912) Cash flows from investing activities Collections on direct financing leases 136,809,538 Collections on notes and loans receivable 6,833,885 Purchase of direct financing lease equipment (180,972,825) Capital expenditures (188,039) ------------- Net cash used in investing activities (37,517,441) Cash flows from financing activities Payments of borrowings from banks, net (23,845,000) Proceeds from securitization 120,041,027 Payments of borrowings from securitizations (12,912,096) Payments of loans from affiliate, net (12,641,347) ------------- Net cash provided by financing activities 70,642,584 ------------- NET INCREASE IN CASH AND CASH EQUIVALENTS 26,810,231 Cash and cash equivalents at beginning of year 1,652,021 ------------- Cash and cash equivalents at end of year $ 28,462,252 ============= Supplemental disclosures of cash flow information: Cash paid (refunded) during the year for: Interest $ 21,798,097 Income taxes $ (149,563) Supplemental disclosures of noncash investing and financing activities Transfer of note receivable to affiliate loan $ 8,175,267
JLA Credit Corporation and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1998 NOTE A - ORGANIZATION JLA Credit Corporation (JLA) was incorporated in the state of Delaware on August 27, 1985, and is engaged principally in funding direct financing leases, loan originations and participations as a creditor. Effective January 1, 1992, JLA became a wholly-owned subsidiary of Japan Leasing (USA), Inc. (JLUS). JLA's former shareholder made contributions of all of JLA's outstanding common stock to JLUS in exchange for newly issued common stock of JLUS. NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES o Use of Estimates In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reporting period. Actual results could differ from those estimates. o Principles of Consolidation The consolidated financial statements include the accounts of JLA and its wholly-owned subsidiaries; JLA Funding Corporation (JLA FC), JLA Funding Corporation II (JLA FC II), and JLA Funding Corporation III (JLA FC III), collectively, the Company. All significant intercompany transactions and balances have been eliminated in consolidation. o Income Recognition Income on notes and loans receivable is accrued as earned based on the interest method. For direct financing leases, unearned income is amortized over the lease term to produce a constant rate of return on the net investment. Accrual of interest income is suspended when collection on an account becomes doubtful, generally after the account becomes 90 days delinquent. Income recognition is generally resumed when the account balance has been brought current. o Allowance for Doubtful Receivables Based on a periodic review of the lease and loan portfolio, an allowance for doubtful receivables is maintained at a level that is estimated by the Company to be sufficient to reasonably provide for expected losses in the present portfolio of leases and notes and loans receivable. o Repossessed Equipment Held for Resale Repossessed equipment held for resale is stated at the lower of cost or market and is included in other assets on the consolidated balance sheet. JLA Credit Corporation and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) December 31, 1998 NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) o Income Taxes The Company files a consolidated federal income tax return with JLUS and files separate state and local income tax returns for all taxing authorities except California and New York. The Company continues to provide for all taxes on a stand-alone basis and settles all federal taxes currently payable through intercompany accounts, due from/due to affiliates, on the consolidated balance sheets. Deferred taxes are provided for temporary differences between the tax basis and financial reporting basis of assets and liabilities, computed at current tax rates. Any future change in those rates would result in an adjustment to the recorded balance of deferred taxes. The Company reviews the realization of the deferred tax asset to determine if a reserve is necessary. o Interest Rate Swap Agreements Interest rate swap agreements are entered into as a means of managing interest rate risk. Net settlements are accrued over the term of the swap agreements as an adjustment to interest expense. Certain interest rate swap agreements were terminated in 1998 (see Note J) and the remaining interest rate swap agreemnts were terminated upon the sale of the Company (see Note M). o Cash and Cash Equivalents Cash and cash equivalents include short-term highly liquid investments with original maturities of three months or less that are readily convertible into cash. At December 31, 1998, the Company had $18.2 million funds restricted as to use under terms of the securitizations. o Defined Contribution Plan The Company provides a defined contribution plan (the "Plan") under section 401k of the Internal Revenue Code. The Plan covers all employees that have completed at least six months of service and are at least 21 years of age. The Company has a discretionary employer contribution which historically has been equal to a dollar for dollar match of the employees contribution up to 5% of the employees compensation. The Company match is vested over a period of seven years at which time the matched amount is fully vested. All employee contributions and earnings are fully vested at the time of contribution or earning. All investment selections are made directly by the employees. The Company's contribution for the year was $159,155. JLA Credit Corporation and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) December 31, 1998 NOTE C - NET INVESTMENT IN DIRECT FINANCING LEASES Direct financing leases consist of the following:
Nonsecuritized minimum lease payments receivable $ 210,913,615 Securitized minimum lease payments receivable 155,589,253 --------------- Total minimum lease payment receivable 366,502,868 Less Unearned income, nonsecuritized (30,153,901) Unearned income, securitized (23,125,440) Allowance for doubtful receivables (5,613,693) Deferred initial direct costs 4,529,721 --------------- Net investment in direct financing leases $ 312,139,555 =============== The minimum lease payments receivable are due in the following installments: Year ending December 31, 1999 $ 126,325,711 2000 109,031,798 2001 70,422,840 2002 38,631,859 2003 15,974,929 Thereafter 6,115,731 --------------- $ 366,502,868 =============== The types of equipment financed consist of the following in the approximate percentages shown below: Industrial equipment 50% Computer equipment 29 Other 11 Office equipment 7 Cars and trucks 3 ------ 100% ======
The Company's leasing transactions with customers located in California represent approximately 47 percent of the minimum lease balance. There was no other geographical concentration greater than 10 percent. In addition, no customer balance exceeded 10 percent of the minimum lease balance. When entering into a leasing transaction, the Company generally does not require any additional collateral other than the security interest in the property leased. The contract receivables are pledged as collateral on the securitized borrowings and the borrowings from banks. JLA Credit Corporation and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) December 31, 1998 NOTE C - NET INVESTMENT IN DIRECT FINANCING LEASES (continued) The net investment in nonearning receivables, which are included in the Company's direct financing lease portfolio, were approximately $5 million. In 1997, the Company entered into an agreement (the Agreement) whereby it obtained the right to issue up to $75 million principal balance of direct financing leases through JLA FC II. During the year the Company securitized $48.3 million principal balance of direct financing leases through JLA FC II and received proceeds of $46.2 million. The transaction was accounted for as a collateralized borrowing, accordingly, the principal balance of securitized leases remains on the Company's balance sheet. In March 1998, the Company entered into an agreement (the "Agreement") whereby it obtained the investor commitments to issue up to $125,000,000 of notes payable by securitizing the principal balance of financing contracts through JLA Funding Corporation III ("JLA FC III"), a special-purpose subsidiary. During 1998, the Company securitized $84,591,032 principal balance of financing contracts through JLA FC III and received proceeds from the securitization of these contracts of $80,385,460. A cash collateral reserve account equal to 1% of the contract receivables is also maintained with the Trustee. The Note Issuance Period under the Agreement terminated January 16, 1999, with no additional note issuances. The transaction was accounted for as a collateralized borrowing; accordingly, the principal balance of the securitized contracts remained on the Company's balance sheet. The proceeds received in connection with the Agreements consisted of notes payable to various domestic and foreign investors. These notes are expected to be paid of as the Company receives aggregate payments on the securitized contract receivables. The contract receivables collateralize the notes, and other creditors of JLA would be subordinate to the note holders with respect to the securitized receivables. The timing and amount of the repayment of the notes are dependent upon the ultimate collection of the securitized lease receivables. NOTE D - ALLOWANCE FOR DOUBTFUL RECEIVABLES The table below shows the activity in allowance for doubtful receivables for the year. Balance at beginning of year $ 5,030,078 Charged to operations, net 3,268,935 Amount written off (2,685,320) -------------- Balance at end of year $ 5,613,693 ============== The Company provides for both a general reserve and a specific reserve. A specific reserve is provided if management believes it is probable that a loss will be sustained on a specific account and that the loss can be reasonably estimated. The Company's assessment of the future value of collateral is inherently subjective, as it requires material estimates that may be susceptible to significant change. JLA Credit Corporation and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) December 31, 1998 NOTE E - BORROWINGS FROM BANKS The interest rates on the borrowings from banks ranged from 5.41% to 8.35%, and the weighted average interest rate, before considering any interest rate swap agreements was 7.26%. The borrowings were paid off in full in February 1999, with proceeds from borrowings obtained by the purchaser (see Note M). NOTE F - ASSET BACKED BORROWINGS The interest rates on the asset backed borrowings range from 5.91% to 7.0%, and the weighted average interest rate was 6.59%. The maturities for assets backed borrowings is as follows: Year ending December 31, ----------- 1999 $ 55,816,150 2000 38,404,587 2001 29,313,768 2002 13,322,874 2003 3,267,530 --------------- $ 140,124,909 =============== NOTE G - DUE TO PARENT The Company has amounts outstanding to the Parent in the form of revolving advances and a note payable. The amounts borrowed are used for working capital. At December 31, 1998, the outstanding balances of the revolving advances and the note payable were $689,701 and $11,221,966, respectively. The note bears interest at LIBOR plus .75% (6.6% at December 31, 1998). The entire outstanding amount was repaid subsequent to year-end as a result of the sale of the Company (see note N). The total interest expense on the notes was $1,678,505. JLA Credit Corporation and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) December 31, 1998 NOTE H - INCOME TAXES The provision (benefit) for income taxes for the year ended consists of the following: Current Federal $ 905,677 State and local 185,500 --------------- 1,091,177 Deferred Federal (45,260) State and local (9,270) --------------- (54,530) --------------- $ 1,036,647 =============== The provision for income tax differs from the federal statutory income tax rate of 35 percent principally due to state income taxes. Net deferred tax assets, which are included in other assets, approximate $3,153,000 and primarily relate to the allowance for doubtful receivables. The Company has historically filed a consolidated federal tax return with its parent. Cumulative amounts due to the parent for income taxes, net of the deferred tax assets, were settled in connection with the sale of the Company (see note M) for $3.5 million. NOTE I - FAIR VALUE OF FINANCIAL INSTRUMENTS The estimated fair value amounts have been determined by the Company, using available market information and valuation methodologies, as described below. Changes in these assumptions or estimation methods may significantly affect the estimated fair values. Accordingly, management provides no assurance that the estimates presented herein would necessarily be realized in an immediate sale or settlement of the instruments. Book values of cash equivalents and other current amounts receivable and payable approximate fair value due to the short maturity of the instruments. The Company generally borrows funds from banks through three to six months revolving lines of credits. The estimated fair values of debts approximate carrying cost due to the short maturity. The securitized borrowings reflect current fair value as the borrowing rate approximates current market conditions. The rates are covered by short-term swap arrangements which assist the rates to approximate current conditions. JLA Credit Corporation and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) December 31, 1998 NOTE J - RELATED PARTY TRANSACTIONS In November 1998, the Company transferred all of its rights and obligations to certain Residual Value Position Pool Agreements to the Parent. The total value transferred was $8,175,267 for which the Company received a reduction in the amount due to Parent. The Parent was the guarantor of the Company's interest rate swap agreements. During the year, the Company was forced to terminate certain swap agreements due to the financial condition of the Parent. The applicable termination fee of approximately $1,600,000 was paid and the cost was borne by the Parent on behalf of the Company. NOTE K - COMMITMENTS AND CONTINGENCIES The Company rents the office facilities for all office locations. Rental expense for the year ended was approximately $385,858. The minimum rental commitments under noncancelable leases are as follows: Year ending December 31, 1999 $ 314,682 2000 268,147 2001 244,879 2002 94,420 2003 44,267 --------------- $ 966,395 =============== NOTE L - YEAR 2000 COMPLIANCE The Year 2000 issue relates to limitations in computer systems and applications that may prevent proper recognition of the Year 2000. The potential effect of the Year 2000 issue on the Company and its business partners will not be fully determinable until the Year 2000 and thereafter. If Year 2000 modifications are not properly completed either by the Company or entities with which the Company conducts business, the Company's revenues and financial condition could be adversely impacted. JLA Credit Corporation and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) December 31, 1998 NOTE M - SUBSEQUENT EVENTS On February 4, 1999, the Company's parent sold all of the Company's common shares to Fidelity Leasing, Inc., a wholly-owned subsidiary of Resource America, Inc. ("RAI"). RAI is a publicly held, Delaware corporation. The purchase price of $39 million, (including $1 million in acquisition related costs) is payable in cash at the closing date. In connection with the sale, certain assets and liabilities were transferred to the Company's parent prior to closing. The accompanying notes are an integral part of this statement. ARTHUR ANDERSEN LLP REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors JLA Credit Corporation: We have audited the accompanying consolidated balance sheets of JLA Credit Corporation (a Delaware corporation) and Subsidiaries as of December 31, 1997 and 1996, and the related consolidated statements of operations and retained earnings and cash flows for the years then ended. These financial statements are the responsibility of the Company's management.. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plans and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also included assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred top above presenting fairly, in all material respects, the financial position of JLA Credit Corporation and Subsidiaries as of December 31, 1997 and 1996, and the results of their operations and their cash flows for the years then ended in conformity with generally accepted accounting principles. /s/ Arthur Andersen LLP San Francisco, California, March 18, 1998 JLA CREDIT CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1997 AND 1996
1997 1996 ---- ---- ASSETS Cash and cash equivalents $ 1,652,021 $ 18,421,711 Investment in direct financing lease: Investment in nonsecuritized direct financing leases 240,465,456 222,545,823 Investment in securitized direct, financing leases 33,958,952 - Allowance for doubtful receivables (5,030,078) (2,827,437) ------------ ------------ Net investment in direct financing leases 269,394,330 219,718,386 Notes and loans receivable 15,009,152 17,842,889 Due from affiliates 58,846 8,627,325 Other real estate owned - 15,000,000 Other assets 8,154,132 7,270,538 Office furniture and equipment, net of accumulated depreciation of $1,369,507 and $1,223,491 in 1997 and 1996, respectively 859,881 1,431,969 ------------ ------------ $295,128,362 $288,312,818 ============ ============ LIABILITIES AND SHAREHOLDER'S EQUITY Liabilities: Borrowings from banks $177,860,000 $156,889,130 Asset-backed borrowing 32,995,978 - Accrued interest payable 2,481,718 1,796,426 Due to affiliates 32,820,014 87,980,061 Other liabilities 11,920,005 7,426,485 ------------ ------------ Total liabilities 258,077,715 254,092,102 ------------ ------------ Commitments and contingencies Shareholder's equity: Common stock, par value $500 per share; 64,000 shares authorized, 60,000 shares issued and outstanding 30,000,000 30,000,000 Additional paid-in capital 250,375 250,375 Retained earnings 6,800,272 3,970,341 ------------ ------------ Total shareholder's equity 37,050,647 34,220,716 ------------ ------------ Total liabilities and shareholder's equity $295,128,362 $288,312,818 ============ ============
The accompanying notes are an integral part of these statements. JLA CREDIT CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
1997 1996 ---- ---- REVENUES: Earned income on direct financing leases $25,664,537 $15,774,050 Interest income on notes and loans receivable 2,186,724 5,000,785 Other income 5,312,850 2,785,174 ----------- ----------- Total revenues 33,164,111 23,560,009 ----------- ----------- EXPENSES: Interest expense 15,530,726 12,033,126 Provision for doubtful receivables 4,945,243 2,004,204 Losses on repossessed equipment 27,824 974,345 General and administrative expenses 7,342,885 5,853,008 Other expenses 315,000 427,895 ----------- ----------- Total expenses 28,161,678 21,292,578 ----------- ----------- Income before provision for income taxes 5,002,433 2,267,431 PROVISION FOR INCOME TAXES 2,172,502 979,480 ----------- ----------- Net income 2,829,931 1,287,951 RETAINED EARNINGS, beginning of year 3,970,341 2,682,390 ----------- ----------- RETAINED EARNINGS, end of year $ 6,800,272 $ 3,970,341 =========== ===========
The accompanying notes are an integral part of these statements. JLA CREDIT CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
1997 1996 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 2,829,931 $ 1,287,951 ------------- ------------- Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,017,046 459,171 Provision for doubtful receivables 4,945,243 2,004,204 Losses on repossessed equipment 27,824 974,346 Changes in assets and liabilities: Other assets (883,594) (415,827) Accrued interest payable 685,291 559,524 Other liabilities 4,493,520 3,044,931 ------------- ------------- Total adjustments 10,285,330 6,626,349 ------------- ------------- Net cash provided by operating activities 13,115,261 7,914,300 ------------- ------------- CASH FLOWS FROM INVESTING ACTIVITIES: Collections on direct financing leases 111,537,085 52,883,062 Collections on notes and loans receivable 4,564,636 25,768,353 Originations of notes and loans receivable (1,759,444) (49,144,504) Originations of direct financing lease equipment (151,165,855) (116,827,209) Purchase of fixed assets (466,529) (454,465) ------------- ------------- Net cash used in investing activities (37,290,107) (87,774,763) ------------- ------------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from borrowings from banks 35,645,071 37,557,479 Repayments of borrowings from banks (14,674,201) (47,285,135) Proceeds from securitization 32,995,978 - Proceeds from (repayments of) loans from affiliate, net (46,561,692) 100,367,611 ------------- ------------- Net cash provided by financing activities 7,405,156 90,639,955 ------------- ------------- Net increase (decrease) in cash and cash equivalents (16,769,690) 10,779,492 CASH AND CASH EQUIVALENTS, beginning of year 18,421,711 7,642,219 ------------- ------------- CASH AND CASH EQUIVALENTS, end of year $ 1,652,021 $ 18,421,711 ============= ============= SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the year for: Interest $ 14,707,418 $ 11,473,602 Income taxes 1,156,007 274,000
The accompanying notes are an integral part of these statements. JLA CREDIT CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31,1997 AND 1996 1. ORGANIZATION: JLA Credit Corporation (JLA) was incorporated in the state of Delaware on August 27,1985, and engaged principally in funding direct financing leases, loan originations and participations as a creditor. Effective January 1, 1992, JLA became a wholly owned subsidiary of Japan Leasing (USA), Inc. (JLUS). JLA's former shareholder made contributions of all of JLA's outstanding common stock to JLUS in exchange for newly issued common stock of JLUS. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Use of Estimates In preparing the financial statements in conformity with generally accepted accounting principles management is required to make estimates and assumptions that affect the amount of reported assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements. The same is true of revenues and expenses reported for the period. Actual results could differ from those estimates. Principles of Consolidation The consolidated financial statements include the accounts of JLA and its wholly owned subsidiaries, JLA Funding Corporation and JLA Funding Corporation II (collectively, the Company). All significant intercompany transactions and balances have been eliminated in consolidation. Income Recognition Income on notes and loans receivable is accrued as earned based on the interest method. For direct financing leases, unearned income is amortized over the lease term to produce a constant rate of return on the net investment. Accrual of interest income is suspended when collection on an account becomes doubtful, generally after the account becomes 90 days delinquent. Income recognition is generally resumed when the account balance has been brought current. Allowance for Doubtful Receivables Based on a periodic review of the lease and loan portfolio, an allowance for doubtful receivables is maintained at a level that is estimated by the Company to be necessary to provide for expected losses in the present portfolio of leases, notes and loans receivable. -2- Repossessed Equipment Held for Resale Repossessed equipment held for resale is stated at the lower of cost or market and is included in other assets on the consolidated balance sheets. Income Taxes The Company files a consolidated federal income tax return with JLUS and files separate state and local income tax returns for all taxing authorities except California and New York. The Company continues to provide for all taxes on a stand-alone basis and settles all federal taxes currently payable through intercompany accounts, due from/due to affiliates, on the consolidated balance sheets. Deferred taxes are provided for temporary differences between the tax basis and financial reporting basis of assets and liabilities, computed at current tax rates. Any future change in those rates would result in an adjustment to the recorded balance of deferred taxes. The Company reviews the realization of the deferred tax asset to determine if a valuation allowance is necessary. Interest Rate Swap Agreements Interest rate swap agreements are entered into as a means of managing interest rate risk. Net settlements are accrued over the term of the swap agreements as an adjustment to interest expense. Cash and Cash Equivalents Cash and cash equivalents include short-term highly liquid investments with original maturities of three months or less that are readily convertible into cash. Reclassification Certain reclassifications have been made to 1996 financial statements to conform with the current year's presentation. 3. NET INVESTMENT IN DIRECT FINANCING LEASES: Leases, which are classified as direct financing leases as of December 31, 1997 and 1996, consist of the following: 1997 1996 ---- ---- Nonsecuritized minimum lease payments receivable $280,979,123 $263,091,757 Securitized minimum lease payments receivable 40,657,854 - ------------ ------------ Total minimum lease payments receivable 321,636,977 263,091,757 Less: Unearned income, nonsecuritized (43,270,026) (41,746,957) Unearned income, securitized (7,363,200) - Allowance for doubtful receivables (5,030,078) (2,827,437) Deferred initial direct costs 3,420,657 1,201,023 ------------ ------------ Net investment in direct financing leases $269,394,330 $219,718,386 ============ ============ -3- The minimum lease payments receivable as of December 31, 1997, are due in the following installments: Year Ending December 31 (000s) ----------- -------- 1998 $112,105 1999 91,002 2000 63,939 2001 37,353 2002 13,238 Thereafter 4,000 -------- $321,637 ======== At December 31, 1997 and 1996, the types of equipment financed consist of the following: 1997 1996 ---- ---- Industrial equipment 49% 51% Office equipment 15 10 Computer equipment 19 24 Cars and trucks 7 5 Other 10 10 --- --- 100% 100% === === The Company's leasing transactions with customers located in California and New York represent approximately 49 percent and 9 percent of the minimum lease receivable balance as of December 31, 1997, and 46 percent and 11 percent as of December 31, 1996. There was no other geographical concentration greater than 10 percent. In addition, there was no customer with a balance greater than 10 percent of the minimum lease receivable balance. When entering into a leasing transaction, the Company generally does not require any additional collateral other than the security interest in the property leased or, in certain cases, personal guarantees. At December 31, 1997 and 1996, net investment in nonearning assets, which were included in the Company's direct financing lease portfolio, were approximately $4.0 million and $3.3 million, respectively. 1994 Securitization In July 1994, the Company securitized $24,084,000 principal balance of direct financing leases and loans receivable (the Receivables) through JLA Funding Corporation, a special-purpose subsidiary. The Company received proceeds of $20,069,000 and retained subordinated certificates receivable in the amount of $3,823,000. The transaction was accounted for as a sale; accordingly, the Receivables were removed from the Company's balance sheets. The income statement impact was nominal. -4- Upon closing, the Company established a cash collateral account as required by the agreement and recorded an excess servicing fee receivable. At December 31, 1996, the cash collateral account and excess servicing fee receivable were $201,000 and $77,000, respectively. The Company continued to service the Receivables and receive a fee in accordance with the servicing agreement. Servicing fees recognized during 1997 and 1996 were $24,000 and $123,000, respectively, and are included in other income on the consolidated statements of operations and retained earnings. At December 31, 1996, the outstanding balance of the Receivables was $3,089,000. In August 1997, the Company exercised a cleanup call option whereby it acquired the remaining principal balance of the Receivables (on the 1994 securitization) and extinguished the respective liabilities associated with the original sale of the Receivables. The outcome of the exercise of the clean-up call was to recognize previously deferred income in the amount of $290,000. This amount is included in other income. At the time of the cleanup call, the outstanding balance of the Receivables in the amount of $1,311,000 was recorded by the Company. 1997 Securitization In September 1997, the Company entered into an agreement (the Agreement) whereby it obtained the investor commitments to securitize up to $75,000,000 principal balance of direct financing leases through JLA Funding Corporation II (JLA FC II), a special-purpose subsidiary. During 1997, the Company securitized $35,115,673 principal balance of direct financing leases through JLA FC II, received proceeds of $32,995,978 and contributed equity in the amount of $2,119,695. In addition, the Company contributed additional cash collateral equaling 1 percent of total collateral. As of December 31, 1997, the balance of the cash collateral account was $351,157. As of December 31, 1997, net investment in securitized direct financing leases, including deferred initial direct costs, was $33,958,952. The transaction was accounted for as a collateralized borrowing; accordingly, the principal balance of securitized leases remained on the Company's balance sheet. The proceeds received in connection with the Agreement consisted of notes payable to various domestic and foreign investors. These notes are expected to be paid off as the Company receives aggregate payments of the securitized lease receivables. The lease receivables collateralize the notes, and other creditors of JLA would be subordinate to the note holders with respect to the securitized receivables. The timing and the amount of the repayment of the notes are dependent upon the ultimate collection of the securitized lease receivables. The interest rate on the notes is tied to the one-month LIBOR rate, and as of December 31, 1997, for Class A senior securities was 6.27 percent and for Class B subordinated securities was 6.61 percent. The weighted average interest rates for 1997 were 6.03 percent for Class A securities and 6.45 percent for Class B securities. The notes were subject to an interest rate cap agreement at 7.5 percent until March 1998, when the cap was terminated and replaced with an interest rate swap agreement. The interest rate swap agreement calls for interest to be paid on the Class A securities at 6.34 percent and on the Class B securities at 7 percent. -5- The estimated repayment schedule for the next five years for the notes payable based upon the underlying receivables as of December 31, 1997, is as follows: Year Ending December 31 ----------- 1998 $ 5,950,844 1999 9,260,879 2000 8,594,933 2001 6,917,100 2002 2,272,222 ----------- $32,995,978 =========== 4. NOTES AND LOANS RECEIVABLE: Notes and loans receivable as of December 31, 1997 and 1996, consist of the following: 1997 1996 ---- ---- Notes and loans receivable $15,009,152 $17,842,889 Interest receivable - - Less: Allowance for doubtful receivables - - ----------- ----------- $15,009,152 $17,842,889 =========== =========== The projected annual receipts for notes and loans receivable as of December 31, 1997, are as follows: Year Ending December 31 ----------- 1998 $ 6,443,798 1999 6,927,435 2000 1,637,919 ----------- $15,009,152 =========== At December 31,1994, the Company had a note receivable of $52.3 million from a partnership that owned land on which the partnership intended to further develop a real estate project. The note was secured by the land and guaranteed by Japan Leasing Corporation (JLC), the Company's ultimate parent. On May 1, 1995, the Company foreclosed on the property and recorded the land as held for sale at an estimated fair value of $15 million. The difference between the book value of the note receivable at that time and the fair value of the land was settled by transferring cash from JLC under the guarantee. In March 1997, the Company disposed of the property in a sale transaction. The difference between the carrying value of the property and proceeds received from the sale as adjusted for closing costs resulted in a net gain on sale in the amount of $2,027,236. This gain was recorded in other income. -6- 5. ALLOWANCE FOR DOUBTFUL RECEIVABLES: The table below shows the activity in allowance for doubtful receivables during 1997 and 1996: Direct Financing Leases ----------------------- 1997 1996 ---- ---- Balance, beginning of year $ 2,827,437 $ 2,079,521 Charge to operations, net 4,945,243 2,004,204 Amount written off (2,742,602) (1,256,288) ----------- ----------- Balance, end of year $ 5,030,078 $ 2,827,437 =========== =========== The Company provides for both a general reserve and a specific reserve. A specific reserve is provided if management believes it is probable that a loss will be sustained and that the loss can be reasonably estimated. The Company's assessment of the future value of collateral is inherently subjective, as it requires material estimates that may be susceptible to significant change. 6. BORROWINGS FROM BANKS: At December 31, 1997 and 1996, the interest rates on the borrowings from banks ranged from 6.25 percent to 7.21 percent and 6.0 percent to 6.4 percent, respectively, and the weighted average interest rates, before considering any interest rate swap agreements, were 6.47 percent for 1997 and 6.07 percent for 1996. The repayment schedule for the next five years and thereafter for borrowings from banks as of December 31, 1997, is as follows: Year Ending December 31 ----------- 1998 $162,760,000 1999 6,920,000 2000 8,180,000 ------------ $177,860,000 ============ The Company has developed relationships with several domestic branch operations of foreign owned banks. These relationships have enabled the Company to extend credit facilities, generally for one year, as they become due. In management's opinion, debt scheduled for repayment in 1998 will be extended, as appropriate, to meet the Company's cash flow requirements for 1998, although no formal agreements have been arranged in anticipation of these extensions. In addition, the Company through an affiliate has the ability to refinance the current portion of the debt as it becomes due. -7- 7. INTEREST RATE INSTRUMENTS: The Company enters into interest rate swap and cap agreements to reduce the impact of changes in interest rates on its floating rate debt. The swap agreements are contracts to exchange floating rate for fixed interest payments periodically without the exchange of the underlying notional amounts. The counterparties to these instruments are major financial institutions. The notional amounts of interest rate agreements are used to measure the interest to be paid or received and do not represent the amount of exposure to credit loss. The differential to be paid or received is accrued as interest rates change and is recognized as an adjustment to interest expense in the income statement. The related accrued receivable or payable is included in other assets or liabilities. At December 31,1997 and 1996, the Company had $140 million and $110 million of aggregate notional principal amounts outstanding, respectively, for the purpose of converting floating rate debt to fixed rate debt. At December 31, 1997 and 1996, the agreements effectively changed the interest rate exposure on $140 million and $110 million of floating rate borrowing to fixed rates ranging from 5.18 percent to 6.38 percent due through 1997 and from 5.23 percent to 8.37 percent due through 1996, and the weighted average interest rates were 5.98 percent and 5.80 percent, respectively. Interest rate caps are used to lock in a maximum rate if rates rise, but enable the Company to otherwise pay lower market rates. The Company had interest rate caps in place protecting $35 million and $30 million of bank borrowings at December 31, 1997 and 1996, respectively. The cap rates ranged between 5.5 percent and 6.5 percent on the underlying LIBOR. The cost of interest rate caps is amortized to interest expense over the life of the caps. The unamortized cost of the interest rate caps is included in other assets. 8. INCOME TAXES: The provision (benefit) for income taxes for the years ended December 31, 1997 and 1996, consists of the following: 1997 1996 ---- ---- Current: Federal $1,996,844 $1,051,161 State and local 956,081 521,469 ---------- ---------- 2,952,925 1,572,630 ---------- ---------- Deferred: Federal (527,742) (424,210) State and local (252,681) (168,940) ---------- ---------- (780,423) (593,150) ---------- ---------- $2,172,502 $ 979,480 ========== ========= The provision for income tax for 1997 and 1996 differs from the federal statutory income tax rate principally due to state income taxes. -8- The components of the net deferred income tax assets at December 31, 1997 and 1996, are as follows: 1997 1996 ---- ----- Gross deferred tax assets $3,098,432 $2,362,653 Gross deferred tax liabilities - (81,444) ---------- ---------- Net deferred tax assets $3,098,432 $2,281,209 ========== ========== Deferred tax assets mainly relate to allowance for doubtful receivables; at December 31, 1996, deferred tax liabilities mainly relate to depreciation of fixed assets. No other significant deferred tax assets or liabilities existed at December 31, 1997 and 1996. Management believes that the realization of the net deferred tax asset is reasonably assured. The net deferred tax assets are included in other assets. 9. FAIR VALUE OF FINANCIAL INSTRUMENTS: The estimated fair value amounts have been determined by the Company, using available market information and valuation methodologies, as described below. Changes in these assumptions or estimation methods may significantly affect the estimated fair values. Accordingly, management provides no assurance that the estimates presented herein would necessarily be realized in an immediate sale or settlement of the instruments. Book values of cash equivalents and other assets and liabilities approximate fair value due to the short maturity of the instruments. The estimated fair value of fixed rate loans is based on discounted future cash flows using current rates for similar instruments having comparable credit risk and maturity dates. The Company generally borrows funds from banks through three to six months revolving lines of credit. The estimated fair values of debts approximate fair value due to the short maturity. Interest rate swap agreements were valued by discounting future cash flows the Company would receive (pay) to reverse the effect of the agreements, taking into consideration current interest rates adjusted for risks and maturity. December 31, 1997 December 31, 1996 ------------------ ----------------- Carrying Fair Carrying Fair Value Value Value Value -------- ------- -------- -------- (000s omitted) Notes and loans receivable $ 15,009 $ 15,009 $ 17,843 $ 17,843 Borrowing from banks and notes payable 210,856 210,856 156,889 156,889 Interest rate swap agreements - (448) - (110) Interest rate cap agreements 458 278 382 502 -9- 10. RELATED-PARTY TRANSACTIONS Due to affiliates includes funds that the Company borrowed from JLUS for working capital purposes. The outstanding loan balance at December 31, 1997, is $32,217,287. The outstanding loan balance at December 31, 1996, was $78,700,756. Interest expense realized on these loans during 1997 and 1996 amounted to approximately $2,989,909 and $2,033,000, respectively. At December 31, 1997 and 1996, the interest rate on the loan balance was 6.5 percent and 6.56 percent, respectively. At December 31,1997 and 1996, the Company had loans receivable of $15.0 million and $17.8 million, respectively, from an affiliate. Under the guarantee agreements between the Company and JLC, the principal and accrued interest on these loans were guaranteed by JLC. Guarantee fees payable to JLC consist of certain percentages of outstanding loan balances and residual proceeds, if any. Guarantee fee expense incurred under this arrangement was approximately $169,000 and $126,000 in 1997 and 1996, respectively. 11. COMMITMENTS AND CONTINGENCIES: Rental expense for office space for the years ended December 31, 1997 and 1996, was approximately $321,000 and $280,000, respectively. The minimum rental commitments under noncancelable leases as of December 31, 1997, are as follows: Year Ending December 31 ----------- 1998 $ 280,387 1999 265,817 2000 228,926 2001 201,757 2002 50,439 Thereafter - ---------- $1,027,326 ========== 12. SUBSEQUENT EVENTS: Subsequent to December 31, 1997, in accordance with the Agreement, the Company securitized an additional $31,225,083 principal balance of direct financing leases through JLA FC II and received proceeds of $30,105,418 and contributed equity in the amount of $1,119,665. In March 1998, Class B securities totaling $3,092,000 that were held by the Company were sold for $3,076,385. In March 1998, the Company entered into a securitization agreement whereby it will securitize its lease receivables and receive proceeds of up to $200 million. This securitization is expected to close by the end of March 1998. The proceeds of this securitization will be used to finance and acquire new equipment contracts. RESOURCE AMERICA, INC. AND SUBSIDIARIES PRO FORMA COMBINED CONSOLIDATED BALANCE SHEET (UNAUDITED) December 31, 1998 (Dollars in Thousands)
================================================================================================================================ Merger Historical Pro Forma Resource JLA Credit Adjustments Combined -------- ---------- ----------- -------- ASSETS Current Assets Cash and cash equivalents $ 51,154 $ 28,462 $ (51,557)(a,b) $ 28,059 Accounts and notes receivable 15,005 11,226 - 26,231 Prepaid expenses and other current assets 5,157 1,281 (956)(a) 5,642 -------- -------- --------- -------- Total Current Assets 71,316 40,969 (52,513) 59,772 Investments in Real Estate Loans 205,358 - - 205,358 Investments in Leases and Notes Receivable 33,836 312,140 (21,875)(a) 324,101 Investment in Resource Asset Investment Trust 9,195 - - 9,195 Property and Equipment Oil and gas properties and equipment 47,863 - - 47,863 (successful efforts) - Gas gathering and transmission facilities 7,131 - - 7,131 Other 9,999 2,034 (1,329)(a) 10,704 -------- -------- --------- -------- 64,993 2,034 (1,329) 65,698 Less - accumulated depreciation, depletion and amortization (17,895) (1,329) 1,329 (a) (17,895) -------- -------- --------- -------- Net Property and Equipment 47,098 705 - 47,803 Deferred Tax Benefit - 3,153 (3,153)(a) - Other Assets 53,115 13 18,202 (a,b) 71,330 -------- -------- --------- -------- $419,918 $356,980 $ (59,339) $717,559 ======== ======== ========= ========
RESOURCE AMERICA, INC. AND SUBSIDIARIES PRO FORMA COMBINED CONSOLIDATED BALANCE SHEET (UNAUDITED) December 31, 1998 (Dollars in Thousands)
================================================================================================================================ Merger Historical Pro Forma Resource JLA Credit Adjustments Combined -------- ---------- ----------- -------- LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilites Borrowings under credit facilities $ 1,125 $ - $ - $ 1,125 Accounts payable - trade 8,852 833 806 (b) 10,491 Accrued liabilities 22,508 3,781 1,194 (b) 27,483 Accrued interest 5,534 834 (325)(a) 6,043 Estimated income taxes 3,878 4,649 (4,649)(a) 3,878 Current portion of long-term debt 7,460 93,150 (41,438)(a) 59,172 -------- -------- --------- -------- Total Current Liabilities 49,357 103,247 (44,412) 108,192 Long-term Debt 129,588 200,990 25,872 (a) 356,450 Deferred Income Taxes - 2,435 (2,435)(a) - Other Long-Term Liabilities 687 11,944 - 12,631 Stockholders' Equity Common stock, $.01 par value, 49,000,000 shares authorized 230 30,000 (30,000)(a) 230 Unrealized loss on investment reported at fair value, net of tax (1,820) - - (1,820) Additional paid-in capital 208,733 250 (250)(a) 208,733 Less Treasury stock, at cost (17,713) - - (17,713) Less loan receivable for ESOP (1,591) - - (1,591) Retained earnings 52,447 8,114 (8,114)(a) 52,447 -------- -------- --------- -------- Total Stockholders' Equity 240,286 38,364 (38,524) 240,286 -------- -------- --------- -------- $419,918 $356,980 $ (59,339) $ 717,559 ======== ======== ========= =========
PRO FORMA COMBINED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED) Three Months Ended December 31, 1998 (In thousands, except per share data)
================================================================================================================================ Merger Historical Pro Forma Resource JLA Credit Adjustments Combined -------- ---------- ----------- -------- Revenues Real estate finance $ 10,856 $ - $ - $ 10,856 Equipment leasing 4,406 9,126 1,500 (f) 15,192 Energy 21,003 - - 21,003 Interest and other 973 - (299)(g) 674 -------- -------- --------- -------- 37,238 9,126 1,201 47,725 Costs and Expenses Real estate finance 1,991 - - 1,991 Equipment leasing 2,033 2,349 - 4,382 Energy 16,919 - - 16,919 General and administrative 1,292 - (836)(c) 456 Depreciation, depletion and amortization 1,748 84 277 (e) 2,109 Interest 4,025 5,468 (138)(d) 9,355 Provision for losses 577 713 - 1,290 -------- -------- --------- -------- 28,585 8,614 (697) 36,502 -------- -------- --------- -------- Income before income taxes and extraordinary item 8,653 512 1,898 11,223 Provision for income taxes 2,942 237 693 (h) 3,872 -------- -------- --------- -------- Income before extraordinary item $ 5,711 $ 275 $ 1,205 $ 7,191 ======== ======== ========= ======== Net income per common share-Basic before extraordinary item $ 0.26 $ 0.33 ======== ======== Weighted average shares outstanding 21,871 21,871 Net income per common share-Diluted before extraordinary item $ 0.26 $ 0.32 ======== ======== Weighted average shares outstanding 22,393 22,393
RESOURCE AMERICA, INC. AND SUBSIDIARIES PRO FORMA COMBINED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED) Years Ended September 30, 1998 and December 31, 1998 (In thousands, except per share data)
================================================================================================================================ Merger Historical Pro Forma Resource JLA Credit Adjustments Combined -------- ---------- ----------- -------- Revenues Real estate finance $ 62,856 $ - $ - $ 62,856 Equipment leasing 13,561 35,490 5,137 (f) 54,188 Energy 6,734 - - 6,734 Interest and other 4,316 - (1,407)(g) 2,909 -------- -------- --------- -------- 87,467 35,490 3,730 126,687 Costs and Expenses Real estate finance 11,112 - - 11,112 Equipment leasing 5,263 - - 5,263 Energy 3,661 - - 3,661 General and administrative 4,373 8,919 (1,789)(c) 11,503 Depreciation, depletion and amortization 2,641 342 1,106 (e) 4,089 Interest 17,464 20,610 (2,821)(d) 35,253 Provision for losses 2,213 3,269 - 5,482 -------- -------- --------- -------- 46,727 33,140 (3,504) 76,363 -------- -------- --------- -------- Income before income taxes and extraordinary item 40,740 2,350 7,234 50,324 Provision for income taxes 13,368 1,037 2,202 (h) 16,607 -------- -------- --------- -------- Income before extraordinary item $ 27,372 $ 1,313 $ 5,032 $ 33,825 ======== ======== ========= ======== Net income per common share-Basic before extraordinary item $ 1.64 $ 2.02 ======== ======== Weighted average shares outstanding 16,703 16,703 Net income per common share-Diluted before extraordinary item $ 1.59 $ 1.95 ======== ======== Weighted average shares outstanding 17,268 17,268
RESOURCE AMERICA, INC. AND SUBSIDIARIES NOTES TO UNAUDITED PRO FORMA COMBINED CONSOLIDATED FINANCIAL STATEMENTS Merger Pro Forma Adjustments as of December 31, 1998 (a) The accompanying unaudited pro forma consolidated balance sheet as of December 31, 1998 has been prepared as if the acquisition of JLA Credit Corp. ("JLA") had occurred on December 31, 1998 and reflects the following adjustments: To adjust assets and liabilities under the purchase method of accounting based on the purchase price. Such purchase price has been allocated to the consolidated assets and liabilities of JLA based on preliminary estimates of fair values, with the remainder allocated to goodwill. The information presented herein may differ from the actual purchase price allocation. The purchase price is determined as follows (in thousands): Cash consideration $ 38,959 ======== The preliminary allocation of the purchase price included in the pro forma balance sheet is summarized as follows (in thousands): Working capital assumed 29,127 Net investment in leases $291,675 Fixed assets 705 Other assets 16,645 Other liabilities (11,944) Debt (287,249) - -------- $ 38,959 ======== (b) To accrue estimated acquisition related costs. The accompanying unaudited pro forma combined consolidated statement of operations for the three months ended December 31, 1998 has been prepared as if the acquisition had occurred on October 1, 1998. The accompanying unaudited pro forma combined consolidated statement of operations for the year ended September 30, 1998 for the Company, and for the year ended December 31, 1998 for JLA have been prepared to reflect operations of JLA for its year that ended within ninety days of the Company's fiscal year end. (c) To record estimated adjustments to equipment leasing expenses for certain estimated cost reductions realized from the combining of operations. (d) To record estimated adjustments to interest expense for reduction of debt (e) To record estimated adjustments to depreciation and amortization expense attributable to the allocation of the purchase price. (f) To record estimated adjustments to equipment leasing revenue as a result of the purchase price allocation. (g) To record estimated reduction of interest income as a result of cash used to acquire JLA (h) To adjust estimated income taxes as a result of above adjustments and to effect RAI's tax rate. -----END PRIVACY-ENHANCED MESSAGE-----