Business & Finance
Business and Finance
Business and Finance
Tue, May 12, 2009
Mon, May 11, 2009 Resource America, Inc.: Resource America, Inc. Reports Operating Results for the Second Fiscal Quarter Ended March 31, 2009
PHILADELPHIA, PA--(Marketwire - May 11, 2009) - Resource America, Inc. (
Jonathan Cohen, President and CEO, commented, "We are pleased that LEAF, our leasing division, has continued to produce solid profitability including improvement over the preceding quarter. At the corporate level we are continuing to emphasize (i) reducing corporate indebtedness; (ii) eliminating exposure to residual interests of financial instruments held as part of Resource Financial Fund Management's programmatic expansion from 2005-2007; and (iii) focusing on our core strengths in raising capital from our retail and institutional channels. We believe we have made progress in achieving these objectives. Our total consolidated indebtedness was reduced from $554 million to $159 million -- and the largest part of the remaining debt is LEAF's nonrecourse revolving credit facility. We were able to reduce corporate debt, net of cash, to $19.3 million from $35.7 million at September 30, 2008 and we reduced our exposure to residual financial interests to $4.5 million, net of tax. Finally, we were pleased with our ongoing success in our retail channel through which we continue to raise a steady stream of capital for our programs. We anticipate that the pace of fund raising for our distressed real estate funds will increase over the next few quarters."
The Company recorded charges, net of tax, of $11.3 million and $13.7 million for the second fiscal quarter and six months ended March 31, 2009, respectively. These charges primarily relate to the Company's decision to sell its interest in Apidos CDO VI, a holder of secured bank loans, for $7.2 million, the impairment of residual interests the Company holds in some of its sponsored funds that invested in bank loans and trust preferred securities, and unrealized declines in the value of the Company's other sponsored funds with investments in financial institutions. The Company no longer consolidated Apidos CDO VI as of March 31, 2009 and has no further exposure with respect to this entity.
In conjunction with the non-cash charges and the loss on sale of Apidos CDO VI, the Company reported a net loss after discontinued operations of $11.6 million, or $0.65 per common share-diluted and $14.9 million, or $0.84 per common share-diluted for the second fiscal quarter and six months ended March 31, 2009, respectively, as compared to net income of $2.0 million, or $0.11 per common share-diluted and a net loss of $9.0 million, or $0.51 per common share-diluted for the second fiscal quarter and six months ended March 31, 2008, respectively.
The Company also reported: -- Capital Fundraising. The Company has raised a total of $113.6 million of financing through May 8, 2009: Retail fundraising. During the second quarter of fiscal 2009, the Company launched one new fund through its retail broker-dealer channel with targeted fundraising of $40.0 million, giving it a total of three retail funds currently in the offering stage: -- LEAF Financial Corp. ("LEAF"), the Company's commercial finance subsidiary, has raised $62.7 million through LEAF Equipment Finance Fund 4, L.P. ("LEAF 4"), its fourth investment partnership; and -- Resource Real Estate Holdings, Inc. ("Resource Real Estate") has raised $24.8 million through its seventh investment partnership and has launched a real estate opportunity fund which will acquire discounted real estate assets for which it has raised $6.1 million. Institutional Fundraising. -- A joint venture with an institutional partner to acquire distressed real estate assets has acquired its fourth asset during the fiscal quarter ended March 31, 2009, for which the institutional partner has invested $15.3 million; and -- The Company has launched a credit opportunities fund to invest in senior bank loans and high yield bonds which has raised approximately $5.0 million. -- Debt Reduction. As of March 31, 2009, the Company reduced its consolidated borrowings outstanding by $725.3 million (82%) to $158.8 million from $884.1 million at March 31, 2008. Borrowings at March 31, 2009 include $97.8 million of non-recourse revolving credit facilities at LEAF and $61.0 million of other debt, which includes $13.7 million of mortgage debt secured by the underlying properties. -- Distressed Real Estate Funds. The Company, through its distressed real estate joint ventures, has closed on approximately $87.0 million of acquisitions, including committed capital, from September 2007 through April 2009. -- Reduced Balance Sheet Exposure. The Company has limited its balance sheet exposure to $233,000, net of tax, with respect to future valuation adjustments on its investments in trust preferred securities. The Company has no exposure to valuation adjustments for residential mortgage-backed securities and has limited its balance sheet exposure to investments in collateralized debt obligations secured by bank loans reported as securities available-for-sale to $4.2 million, net of tax. -- Adjusted Revenues and Adjusted Operating Income. For the second fiscal quarter and six months ended March 31, 2009, the Company reported adjusted revenues of $26.0 million and $59.4 million, respectively, as compared to $51.5 million and $102.3 million for the second fiscal quarter and six months ended March 31, 2008, respectively. For the second fiscal quarter and six months ended March 31, 2009, the Company reported adjusted operating income of $2.7 million and $7.8 million, respectively, as compared to $21.6 million and $43.7 million for the second fiscal quarter and six months ended March 31, 2008, respectively. Adjusted revenues and adjusted operating income, both non-GAAP measures, include $(1.2) million and $37,000 of pre-tax fair value adjustments on investments reported under the equity method of accounting for the second fiscal quarter and six months ended March 31, 2009, respectively, as compared to $1.1 million and $7.8 million for the second fiscal quarter and six months ended March 31, 2008, respectively. A reconciliation of the Company's reported GAAP revenue and operating income to adjusted revenue and adjusted operating income is included as Schedule II to this release. Assets Under Management
Assets under management decreased $1.0 billion, or 6%, to $16.7 billion at March 31, 2009 from $17.7 billion at March 31, 2008.
The following table details the Company's assets under management by operating segment:
At March 31, ----------------------------- 2009 2008 -------------- -------------- Financial fund management $ 13.5 billion $ 14.3 billion Real estate 1.7 billion 1.7 billion Commercial finance 1.5 billion 1.7 billion -------------- -------------- $ 16.7 billion $ 17.7 billion ============== ==============
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, 2008.
Book Value
As of March 31, 2009, the Company's book value per common share was $7.19 per share. Total stockholders' equity was $128.8 million as of March 31, 2009 as compared to $156.1 million as of March 31, 2008. Total common shares outstanding were 17,900,293 as of March 31, 2009 as compared to 17,525,420 as of March 31, 2008.
Highlights for the Second Fiscal Quarter Ended March 31, 2009 and Recent Developments
-- The Company has reduced its total borrowings to $158.8 million at March 31, 2009, a decrease of $395.2 million from September 30, 2008. This reduction largely reflects the sale of all or part of its interest in Apidos CDO VI and LEAF Commercial Finance Fund ("LCFF"), two investment vehicles we sponsored and previously consolidated. These sales eliminated the senior notes of Apidos CDO VI ($213.3 million net outstanding at September 30, 2008) and LCFF debt ($143.8 million at September 30, 2008). Additionally, the Company reduced its outstanding borrowings on its commercial finance revolving warehouse credit facility by $31.2 million and on one of its corporate revolving lines of credit by $6.4 million. -- Resource Real Estate Holdings, Inc. ("Resource Real Estate"), the Company's real estate asset manager that invests in and manages real estate investment vehicles on behalf of itself and for outside investors and operates the Company's commercial real estate debt platform, has acquired $81.7 million in real estate assets for its investment vehicles since April 1, 2008. -- Resource Real Estate commenced fundraising for Resource Real Estate Opportunity Fund L.P. ("RREI Opp Fund"), a $40.0 million offering that will invest in discounted real estate. Through May 8, 2009, Resource Real Estate has raised $6.1 million through RREI Opp Fund. -- Resource Real Estate continued fundraising for Resource Real Estate Investors 7, L.P. ("RREI 7"), a $40.0 million offering that is investing in multifamily real estate assets. Through May 8, 2009, Resource Real Estate has raised $24.8 million through RREI 7 and anticipates closing this fund in August 2009. -- Resource Real Estate's wholly-owned subsidiary, Resource Residential, a multifamily and commercial property management company, employed 313 property management personnel as of March 31, 2009. In February 2009, Resource Residential became one of the first multifamily property management companies in the U.S. to adopt a lease assurance program which allows tenants who involuntarily lose their employment to terminate their leases in 45 days without penalty. Resource Residential also instituted and expanded use of the LRO™ System which allows it to optimize rental rates by adjusting them on a daily basis. -- Resource Real Estate increased the apartment units it manages or whose management it supervises to 17,070 at March 31, 2009 from 15,230 at March 31, 2008. This includes a portfolio of 50 multifamily properties representing 12,301 apartment units managed by Resource Residential. -- Resource Capital Corp. (NYSE : [ RSO ]), a real estate investment trust for which the Company is the external manager and a shareholder, paid a cash dividend of $0.30 per common share for its first quarter ended March 31, 2009. -- The Company generated $11.8 million of cash from operating activities from continuing operations as adjusted during the six months ended March 31, 2009. A reconciliation of net cash provided by operating activities of continuing operations to net cash provided by operating activities of continuing operations as adjusted, a non-GAAP measure, is included as Schedule III to this release. Resource America, Inc. is a specialized asset management company that uses industry specific expertise to evaluate, originate, service and manage investment opportunities for its own account and for outside investors in the commercial finance, real estate and financial fund management sectors.
For more information, please visit our website at [ www.resourceamerica.com ] or contact investor relations at [ pkamdar@resourceamerica.com ].
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 and its other reports filed with the Securities and Exchange Commission. 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 Company undertakes no obligation to update or revise any forward-looking statements to reflect new or changing information or events except as may be required by law.
This press release shall not constitute an offer to sell or a solicitation of an offer to buy any of the securities described herein, nor shall there be any sale of these securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction. A copy of the prospectus relating to the offering of Fund 4 may be obtained by contacting Chadwick Securities, Inc. at (866) 323-0241.
The remainder of this release contains the Company's consolidated balance sheets, consolidated statements of operations, consolidated statements of cash flows, a reconciliation of GAAP (loss) income from continuing operations to adjusted income from continuing operations, a reconciliation of GAAP revenue to adjusted revenue and GAAP operating income to adjusted operating income and a reconciliation of net cash provided by operating activities of continuing operations to net cash provided by operating activities of continuing operations as adjusted.
RESOURCE AMERICA, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except share data) March 31, September 30, 2009 2008 ------------- ------------- (unaudited) ASSETS Cash $ 24,910 $ 14,910 Restricted cash 3,710 23,689 Receivables 9,341 2,014 Receivables from managed entities and related parties 45,837 35,674 Loans sold, not settled, at fair value - 662 Loans held for investment, net - 219,664 Investments in commercial finance - held for investment, net 37,807 182,315 Investments in commercial finance - held for sale, at fair value 70,381 110,773 Investments in real estate, net 27,396 37,972 Investment securities available-for-sale, at fair value 13,496 22,746 Investments in unconsolidated entities 17,085 18,523 Property and equipment, net 15,059 16,886 Deferred tax assets 48,635 44,467 Goodwill 7,969 7,969 Intangible assets, net 4,004 4,329 Other assets 10,949 15,764 ------------- ------------- Total assets $ 336,579 $ 758,357 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY Accrued expenses and other liabilities $ 47,008 $ 56,309 Payables to managed entities and related parties 577 586 Borrowings 158,843 554,059 Deferred tax liabilities 983 1,060 Minority interests 409 2,610 ------------- ------------- Total liabilities 207,820 614,624 ------------- ------------- 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; 27,661,044 and 27,421,552 shares issued, respectively (including nonvested restricted stock of 509,610 and 513,386, respectively) 272 269 Additional paid-in capital 271,535 269,689 Accumulated deficit (21,313) (3,980) Treasury stock, at cost; 9,251,141 and 9,312,232 shares, respectively (100,776) (101,440) Accumulated other comprehensive loss (20,959) (20,805) ------------- ------------- Total stockholders' equity 128,759 143,733 ------------- ------------- $ 336,579 $ 758,357 ============= ============= RESOURCE AMERICA, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) (unaudited) Three Months Ended Six Months Ended March 31, March 31, -------------------- -------------------- 2009 2008 2009 2008 --------- --------- --------- --------- REVENUES Commercial finance $ 13,421 $ 32,665 $ 28,805 $ 60,630 Real estate 5,173 6,692 12,063 13,164 Financial fund management 8,611 11,023 18,530 20,645 --------- --------- --------- --------- 27,205 50,380 59,398 94,439 COSTS AND EXPENSES Commercial finance 6,774 12,081 14,223 21,462 Real estate 5,370 5,326 11,288 10,792 Financial fund management 5,082 6,284 10,810 12,898 General and administrative 3,670 3,757 7,678 7,215 Provision for credit losses 853 1,447 4,597 4,220 Depreciation and amortization 1,535 985 3,082 1,950 --------- --------- --------- --------- 23,284 29,880 51,678 58,537 --------- --------- --------- --------- OPERATING INCOME 3,921 20,500 7,720 35,902 OTHER (EXPENSE) INCOME Interest expense (5,924) (14,595) (14,323) (29,272) Minority interest income (expense), net 725 (2,176) 1,539 (3,267) (Loss) gain on sale of loans and investment securities, net (11,588) 312 (11,588) (18,020) Impairment charges on investment securities (3,039) (132) (7,962) (1,149) Other income, net 544 1,112 2,243 2,093 --------- --------- --------- --------- (19,282) (15,479) (30,091) (49,615) --------- --------- --------- --------- (Loss) income from continuing operations before taxes (15,361) 5,021 (22,371) (13,713) Income tax (benefit) provision for income taxes (3,891) 2,931 (7,606) (4,937) --------- --------- --------- --------- (Loss) income from continuing operations (11,470) 2,090 (14,765) (8,776) Loss from discontinued operations, net of tax (163) (107) (88) (218) --------- --------- --------- --------- NET (LOSS) INCOME $ (11,633) $ 1,983 $ (14,853) $ (8,994) ========= ========= ========= ========= Basic (loss) earnings per common share: Continuing operations $ (0.64) $ 0.12 $ (0.83) $ (0.50) Discontinued operations (0.01) (0.01) (0.01) (0.01) --------- --------- --------- --------- Net (loss) income $ (0.65) $ 0.11 $ (0.84) $ (0.51) ========= ========= ========= ========= Weighted average shares outstanding 17,815 17,504 17,726 17,466 ========= ========= ========= ========= Diluted (loss) earnings per common share: Continuing operations $ (0.64) $ 0.12 $ (0.83) $ (0.50) Discontinued operations (0.01) (0.01) (0.01) (0.01) --------- --------- --------- --------- Net (loss) income $ (0.65) $ 0.11 $ (0.84) $ (0.51) ========= ========= ========= ========= Weighted average shares outstanding 17,815 18,576 17,726 17,466 ========= ========= ========= ========= Dividends declared per common share $ 0.07 $ 0.07 $ 0.14 $ 0.14 RESOURCE AMERICA, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited) Six Months Ended March 31, -------------------- 2009 2008 --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (14,853) $ (8,994) Adjustments to reconcile net loss to net cash provided by operating activities, net of acquisitions: Impairment charges on investment securities available-for-sale 7,962 1,149 Depreciation and amortization 4,156 2,509 Provision for credit losses 4,597 4,220 Minority interest (income) expense (1,539) 3,267 Equity in (earnings) losses of unconsolidated entities (199) 1,373 Distributions from unconsolidated entities 3,053 8,658 Loss on sale of loans and investment securities, net 11,588 18,020 Gain on sale of investments in commercial finance assets (319) - Gain on sale of investment securities available-for-sale (40) - Gain on sale of assets (688) (2,033) Deferred income tax (benefit) provision (14,520) 735 Non-cash compensation on long-term incentive plans 2,774 2,388 Non-cash compensation issued 1 62 Non-cash compensation received (98) 356 Decrease in commercial finance investments 4,390 59,603 Changes in operating assets and liabilities (4,494) (36,438) --------- --------- Net cash provided by operating activities of continuing operations 1,771 54,875 --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (184) (5,549) Payments received on real estate loans and real estate 10,036 8,104 Investments in real estate (2,232) (4,074) Purchase of commercial finance assets held for investment (41,942) (71,586) Payments received on commercial finance assets held for investment 33,643 43,859 Purchase of loans and investment securities (19,036) (239,551) Proceeds from sale of loans and investment securities 13,275 5,215 Principal payments received on loans 3,975 6,126 Net cash paid for acquisitions - (8,022) Increase in other (1,394) (3,795) --------- --------- Net cash used in investing activities of continuing operations (3,859) (269,273) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Increase in borrowings 263,714 616,335 Principal payments on borrowings (258,054) (385,314) Minority interest contributions 1 315 Distributions paid to minority interest holders (73) (1,243) Dividends paid (2,480) (2,447) Decrease (increase) in restricted cash 9,326 (16,229) Proceeds from issuance of stock 3 182 Purchase of treasury stock - (237) Repurchase of subsidiary stock (264) - --------- --------- Net cash provided by financing activities of continuing operations 12,173 211,362 --------- --------- CASH FLOWS FROM DISCONTINUED OPERATIONS: Operating activities (8) 3 Financing activities (77) - --------- --------- Net cash (used in) provided by discontinued operations (85) 3 --------- --------- Increase (decrease) in cash 10,000 (3,033) Cash at beginning of period 14,910 14,624 --------- --------- Cash at end of period $ 24,910 $ 11,591 ========= =========
This press release contains supplemental financial information determined by methods other than in accordance with Accounting Principles Generally Accepted in the United States of America ("GAAP"). The Company's management uses these non-GAAP measures in its analysis of the exclusion of certain adjustments recorded in the three and six months ended March 31, 2009. Management believes the presentation of these financial measures excluding the impact of these items provides useful supplemental information that is essential to a proper understanding of the financial results of the Company. These disclosures should not be viewed as a substitute for results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.
SCHEDULE I RECONCILIATION OF GAAP (LOSS) INCOME FROM CONTINUING OPERATIONS TO ADJUSTED INCOME FROM CONTINUING OPERATIONS (in thousands, except per share data) (unaudited) Three Months Ended Six Months Ended March 31, March 31, -------------------- -------------------- 2009 2008 2009 2008 --------- --------- --------- --------- (Loss) income from continuing operations - GAAP $ (11,470) $ 2,090 $ (14,765) $ (8,776) Adjustments, net of tax: Partnership level adjustments (1) (116) 651 723 4,920 Impairment charge on CDO investments 1,460 84 4,191 735 Loan reserves - - 675 - Loss (gain) on sale of loans and investment securities, net 8,652 (342) 8,120 11,390 Severance costs 1,099 - 1,219 - Resource residential start-up costs - - - 349 RCC incentive stock 464 950 410 950 Other 715 - 402 - Tax rate normalization - 1,134 - - --------- --------- --------- --------- Adjusted income from continuing operations (2) $ 804 $ 4,567 $ 975 $ 9,568 ========= ========= ========= ========= Weighted average diluted shares outstanding (3) 18,874 18,576 18,466 18,608 ========= ========= ========= ========= Adjusted income from continuing operations per share-diluted $ 0.04 $ 0.25 $ 0.05 $ 0.51 ========= ========= ========= ========= (1) Primarily includes mark to market adjustments on investments in partnerships that the Company manages. (2) During the six months ended March 31, 2009 and 2008, in connection with substantial volatility and reduction in liquidity in the global credit markets, the Company recorded several significant adjustments that it believes do not directly impact its continuing operations. For comparability purposes, the Company is presenting adjusted income from continuing operations because it facilitates the evaluation of the Company's underlying operating performance without the effect of adjustments that do not directly relate to that performance. Adjusted income from continuing operations should not be considered as an alternative to (loss) income from continuing operations (computed in accordance with GAAP). Instead, adjusted income from continuing operations should be reviewed in connection with (loss) income from continuing operations in the Company's consolidated financial statements, to help analyze how the Company's business is performing. (3) Dilutive shares used in the calculation of adjusted income from continuing operations per share-diluted includes an additional 1,059,000 shares for the three months ended March 31, 2009, and 740,000 and 1,142,000 shares for the six months ended March 31, 2009 and 2008, respectively, which were not used in the calculation of loss from continuing operations per share-diluted. SCHEDULE II RECONCILIATION OF GAAP REVENUE TO ADJUSTED REVENUE AND RECONCILIATION OF GAAP OPERATING INCOME TO ADJUSTED OPERATING INCOME (in thousands) (unaudited) Three Months Ended Six Months Ended March 31, March 31, ------------------ ------------------- 2009 2008 2009 2008 -------- --------- --------- --------- Revenues Commercial finance $ 13,421 $ 32,665 $ 28,805 $ 60,630 Real estate 5,173 6,692 12,063 13,164 Financial fund management 8,611 11,023 18,530 20,645 -------- --------- --------- --------- Total revenues - GAAP 27,205 50,380 59,398 94,439 Adjustments: Fair value adjustments (1) (1,181) 1,146 37 7,827 -------- --------- --------- --------- Adjusted revenues (2) $ 26,024 $ 51,526 $ 59,435 $ 102,266 ======== ========= ========= ========= Operating income - GAAP $ 3,921 $ 20,500 $ 7,720 $ 35,902 Adjustments: Fair value adjustments (1) (1,181) 1,146 37 7,827 -------- --------- --------- --------- Adjusted operating income (2) $ 2,740 $ 21,646 $ 7,757 $ 43,729 ======== ========= ========= ========= (1) Reflects pre-tax fair value adjustments on investments reported under the equity method of accounting. (2) Management of the Company views adjusted revenues and adjusted operating income, both non-GAAP measures, as useful and appropriate supplements to revenues and operating income since they exclude fair value adjustments related to current credit market conditions and are not indicative of the Company's current operating performance.
SCHEDULE III RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES OF CONTINUING OPERATIONS TO NET CASH PROVIDED BY OPERATING ACTIVITIES OF CONTINUING OPERATIONS AS ADJUSTED (in thousands) (unaudited)
Net cash provided by operating activities of continuing operations as adjusted was $11.8 million for the six months ended March 31, 2009, a decrease of $23.4 million as compared to net cash provided by operating activities of $35.2 million in the six months ended March 31, 2008. The following reconciles net cash provided by operating activities of continuing operations to net cash provided by operating activities of continuing operations as adjusted:
Six Months Ended March 31, ------------------ 2009 2008 -------- -------- Net cash provided by operating activities of continuing operations $ 1,771 $ 54,875 Adjustments: Increase in commercial finance investments (4,390) (59,603) Changes in operating assets and liabilities 4,494 36,948 Proceeds from sales of certain loans and investment securities 9,900 2,933 -------- -------- Net cash provided by operating activities of continuing operations as adjusted $ 11,775 $ 35,153 ======== ======== (1) Management of the Company believes net cash provided by operating activities of continuing operations as adjusted is a useful and appropriate supplement to GAAP net cash provided by operating activities of continuing operations since it reflects how management views its liquidity and working capital requirements.
