Jonathan Cohen, CEO and President commented, "Our financial results reflect our continued commitment to ramping professional and marketing costs to take advantage of the opportunity in distressed loans and real estate. Nonetheless, this quarter shows what we think will be the start on the road back to true profitability. We are excited about the continued fundraising, lower debt levels and superb positioning of our leasing and distressed real estate platforms."
The Company reported a net loss of $204,000, or $0.01 per common share-diluted, and $15.1 million, or $0.85 per common share-diluted, for the third fiscal quarter and nine months ended June 30, 2009, respectively, as compared to a net loss of $8.0 million, or $0.46 per common share-diluted, and $17.0 million, or $0.97 per common share-diluted, for the third fiscal quarter and nine months ended June 30, 2008, respectively. The loss recorded for the nine months ended June 30, 2009 was primarily the result of non-cash charges, net of tax, of $15.5 million, including a $7.2 million loss related to the Company's decision to sell its interest in Apidos CDO VI recorded during the second fiscal quarter ended March 31, 2009.
The Company also reported:
-- Capital Fundraising.
-- The Company has raised a total of $146.0 million of investment
funds during fiscal 2009 for funds sponsored and managed by
Resource Real Estate Holdings, Inc. ("Resource Real Estate")
and LEAF Financial Corp. ("LEAF"); and
-- Resource Real Estate filed a $750.0 million registration
statement with the Securities and Exchange Commission on July
7, 2009 for Resource Real Estate Opportunity REIT, Inc. of
which Resource Real Estate will be the external manager.
-- Debt Reduction. As of June 30, 2009, the Company reduced its consolidated borrowings outstanding by $392.9 million, or 68%, to $181.6 million from $574.5 million at June 30, 2008. Borrowings at June 30, 2009 include a $130.6 million non-recourse revolving credit facility at LEAF and $51.0 million of other debt, which includes $13.6 million of mortgage debt secured by the underlying properties.
-- Adjusted Revenues and Adjusted Operating (Loss) Income - Non-GAAP Measures. For the third fiscal quarter and nine months ended June 30, 2009, the Company reported adjusted revenues of $22.4 million and $81.8 million, respectively, as compared to $39.1 million and $141.4 million for the third fiscal quarter and nine months ended June 30, 2008, respectively. For the third fiscal quarter and nine months ended June 30, 2009, the Company reported an adjusted operating loss of $336,000 and adjusted operating income of $7.4 million, respectively, as compared to adjusted operating income of $8.8 million and $52.5 million for the third fiscal quarter and nine months ended June 30, 2008, respectively. Adjusted revenues and adjusted operating (loss) income include $(263,000) and $(226,000) of pre-tax fair value adjustments on investments reported under the equity method of accounting for the third fiscal quarter and nine months ended June 30, 2009, respectively, as compared to adjustments of $9.7 million and $17.5 million for the third fiscal quarter and nine months ended June 30, 2008, respectively. A reconciliation of the Company's total GAAP revenue and GAAP operating (loss) income to adjusted revenue and adjusted operating (loss) income is included as Schedule II to this release.
Assets Under Management
Assets under management decreased $4.5 billion, or 24%, to $14.3 billion at June 30, 2009 from $18.8 billion at June 30, 2008.
The following table details the Company's assets under management by operating segment:
At June 30,
------------------------------
2009 2008
-------------- --------------
Financial fund management $ 11.2 billion $ 15.4 billion
Real estate 1.7 billion 1.8 billion
Commercial finance 1.4 billion 1.6 billion
-------------- --------------
$ 14.3 billion $ 18.8 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 June 30, 2009, the Company's book value per common share was $7.32 per share. Total stockholders' equity was $131.4 million as of June 30, 2009 as compared to $156.6 million as of June 30, 2008. Total common shares outstanding were 17,950,360 as of June 30, 2009 as compared to 17,575,599 as of June 30, 2008.
Highlights for the Third Fiscal Quarter Ended June 30, 2009 and Recent Developments
-- The Company has reduced its total borrowings to $181.6 million at June
30, 2009, a decrease of $372.4 million from September 30, 2008. This
reduction largely reflects the sale of all or part of its interests 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
corporate revolving lines of credit by $16.1 million.
-- The Company has reduced its recourse corporate borrowings to $34.5
million at June 30, 2009.
-- 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 August 4, 2009, Resource Real
Estate has raised $29.4 million through RREI 7 and anticipates closing this
fund in August 2009.
-- Resource Real Estate continued 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 August 4, 2009, Resource
Real Estate has raised $14.7 million through RREI Opp Fund and anticipates
closing this fund in December 2009.
-- A joint venture with an institutional partner to acquire distressed
real estate assets has acquired its fifth asset during the third fiscal
quarter ended June 30, 2009, for which the institutional partner has
invested $3.2 million.
-- Resource Real Estate filed a $750.0 million registration statement
with the Securities and Exchange Commission on July 7, 2009 for Resource
Real Estate Opportunity REIT, Inc.
-- Resource Real Estate increased the apartment and condominium units it
manages or whose management it supervises to 16,580 at June 30, 2009 from
15,758 at June 30, 2008. This includes a portfolio of 50 multifamily
properties representing 12,134 apartment units managed by Resource Real
Estate Management, Inc. ("Resource Residential"), the Company's property
management subsidiary.
-- LEAF continued fundraising for LEAF 4, a $200.0 million public
offering for an equipment leasing partnership. Through August 4, 2009,
LEAF has raised $87.9 million through LEAF 4 and anticipates closing this
fund in August 2010.
-- The Company's Board of Directors authorized the payment of a cash
dividend paid on June 30, 2009 in the amount of $0.03 per share on the
Company's common stock to all holders of record at the close of business on
May 29, 2009.
-- Resource Capital Corp. ("RCC") (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 second quarter ended June
30, 2009.
-- The Company generated $34.5 million of cash from operating activities
from continuing operations as adjusted for the nine months ended June 30,
2009. A reconciliation of net cash (used in) 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, originates, 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.
The remainder of this release contains the Company's consolidated balance sheets, consolidated statements of operations, consolidated statements of cash flows, and reconciliations of GAAP loss from continuing operations to adjusted (loss) income from continuing operations, GAAP revenue to adjusted revenue and GAAP operating (loss) income to adjusted operating (loss) income and net cash (used in) provided by operating activities of continuing operations to net cash provided by operating activities of continuing operations as adjusted.
RESOURCE AMERICA, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
June 30, September
2009 30, 2008
----------- -----------
(unaudited)
ASSETS
Cash $ 17,481 $ 14,910
Restricted cash 3,506 23,689
Receivables 1,694 2,014
Receivables from managed entities and related
parties 55,443 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 7,027 182,315
Investments in commercial finance - held for
sale 137,928 110,773
Investments in real estate, net 26,705 37,972
Investment securities available-for-sale, at
fair value 15,524 22,746
Investments in unconsolidated entities 17,093 18,523
Property and equipment, net 14,086 16,886
Deferred tax assets 47,437 44,467
Goodwill 7,969 7,969
Intangible assets, net 3,825 4,329
Other assets 11,751 15,764
----------- -----------
Total assets $ 367,469 $ 758,357
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accrued expenses and other liabilities $ 44,188 $ 56,309
Payables to managed entities and related
parties 8,877 586
Borrowings 181,614 554,059
Deferred tax liabilities 1,006 1,060
Minority interests 399 2,610
----------- -----------
Total liabilities 236,084 614,624
----------- -----------
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; 27,684,424 and 27,421,552 shares
issued, respectively (including
nonvested restricted stock of 503,839 and
513,386, respectively) 272 269
Additional paid-in capital 272,320 269,689
Accumulated deficit (22,057) (3,980)
Treasury stock, at cost; 9,230,225 and
9,312,232 shares, respectively (100,547) (101,440)
Accumulated other comprehensive loss (18,603) (20,805)
----------- -----------
Total stockholders' equity 131,385 143,733
----------- -----------
$ 367,469 $ 758,357
=========== ===========
RESOURCE AMERICA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Three Months Ended Nine Months Ended
June 30, June 30,
-------------------- --------------------
2009 2008 2009 2008
--------- --------- --------- ---------
REVENUES
Commercial finance $ 10,547 $ 21,802 $ 39,352 $ 82,432
Real estate 5,198 5,626 17,261 18,790
Financial fund management 6,884 2,017 25,414 22,662
--------- --------- --------- ---------
22,629 29,445 82,027 123,884
--------- --------- --------- ---------
COSTS AND EXPENSES
Commercial finance 5,841 10,751 20,064 32,213
Real estate 5,821 5,672 17,109 16,464
Financial fund management 4,722 7,122 15,532 20,020
General and administrative 3,371 3,954 11,049 11,169
Provision for credit losses 1,048 1,550 5,645 5,770
Depreciation and amortization 1,899 1,301 4,981 3,251
--------- --------- --------- ---------
22,702 30,350 74,380 88,887
--------- --------- --------- ---------
OPERATING (LOSS) INCOME (73) (905) 7,647 34,997
OTHER (EXPENSE) INCOME
Interest expense (2,634) (9,776) (16,957) (39,048)
Minority interest (expense)
income, net (13) 2,590 1,526 (677)
Gain (loss) on sale of loans
and investment securities, net - 346 (11,588) (17,674)
Impairment charges on
investment securities - (6,974) (7,962) (8,123)
Other income, net 981 1,098 3,224 3,191
--------- --------- --------- ---------
(1,666) (12,716) (31,757) (62,331)
--------- --------- --------- ---------
Loss from continuing operations
before taxes (1,739) (13,621) (24,110) (27,334)
Benefit for income taxes (1,613) (5,723) (9,219) (10,660)
--------- --------- --------- ---------
Loss from continuing operations (126) (7,898) (14,891) (16,674)
Loss from discontinued
operations, net of tax (78) (127) (166) (345)
--------- --------- --------- ---------
NET LOSS $ (204) $ (8,025) $ (15,057) $ (17,019)
========= ========= ========= =========
Basic loss per common share:
Continuing operations $ (0.01) $ (0.45) $ (0.84) $ (0.95)
Discontinued operations - (0.01) (0.01) (0.02)
--------- --------- --------- ---------
Net loss $ (0.01) $ (0.46) $ (0.85) $ (0.97)
========= ========= ========= =========
Weighted average shares
outstanding 17,914 17,549 17,789 17,493
========= ========= ========= =========
Diluted loss per common share:
Continuing operations $ (0.01) $ (0.45) $ (0.84) $ (0.95)
Discontinued operations - (0.01) (0.01) (0.02)
--------- --------- --------- ---------
Net loss $ (0.01) $ (0.46) $ (0.85) $ (0.97)
========= ========= ========= =========
Weighted average shares
outstanding 17,914 17,549 17,789 17,493
========= ========= ========= =========
Dividends declared per common
share $ 0.03 $ 0.07 $ 0.17 $ 0.21
RESOURCE AMERICA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Nine Months Ended
June 30,
--------------------
2009 2008
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (15,057) $ (17,019)
Adjustments to reconcile net loss to net cash (used
in) provided by operating activities, net of
acquisitions:
Impairment charges on investment securities
available-for-sale 7,962 8,123
Depreciation and amortization 6,567 4,299
Provision for credit losses 5,645 5,770
Minority interest (income) expense (1,526) 677
Equity in (earnings) losses of unconsolidated
entities (758) 10,260
Distributions from unconsolidated entities 4,549 14,651
Loss on sale of loans and investment securities, net 11,588 17,674
Gain on sale of investments in commercial finance
assets (363) -
Gain on sale of assets (635) (2,033)
Deferred income tax benefit (4,348) (13,689)
Non-cash compensation on long-term incentive plans 3,788 3,808
Non-cash compensation issued 110 107
Non-cash compensation received (98) 359
(Increase) decrease in commercial finance investments (32,149) 61,148
Changes in operating assets and liabilities (18,524) (14,627)
--------- ---------
Net cash (used in) provided by operating activities
of continuing operations (33,249) 79,508
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (244) (5,621)
Payments received on real estate loans and real
estate 10,044 8,109
Investments in real estate (3,230) (8,380)
Return of capital from investments in unconsolidated
entities 684 -
Purchase of commercial finance assets held for
investment (41,942) (74,017)
Payments received on commercial finance assets held
for investment 44,607 48,711
Purchase of loans and investment securities (19,203) (247,067)
Proceeds from sale of loans and investment securities 4,061 27,701
Principal payments received on loans 4,561 10,071
Net cash paid for acquisitions - (8,022)
Increase in other (2,464) (17,352)
--------- ---------
Net cash used in investing activities of continuing
operations (3,126) (265,867)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in borrowings 350,856 780,898
Principal payments on borrowings (322,424) (568,617)
Repayment from managed entity on RCC lease portfolio
purchase 4,500 -
Minority interest contributions 1 315
Distributions paid to minority interest holders (73) (1,394)
Dividends paid (3,020) (3,676)
Decrease (increase) in restricted cash 9,532 (27,948)
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 39,111 179,523
--------- ---------
CASH FLOWS FROM DISCONTINUED OPERATIONS:
Operating activities (6) 9
Financing activities (159) -
--------- ---------
Net cash (used in) provided by discontinued
operations (165) 9
--------- ---------
Increase (decrease) in cash 2,571 (6,827)
Cash at beginning of period 14,910 14,624
--------- ---------
Cash at end of period $ 17,481 $ 7,797
========= =========
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 nine months ended June 30, 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 FROM CONTINUING OPERATIONS
TO ADJUSTED (LOSS) INCOME FROM CONTINUING OPERATIONS
(in thousands, except per share data)
(unaudited)
Three Months Ended Nine Months Ended
June 30, June 30,
-------------------- --------------------
2009 2008 2009 2008
--------- --------- --------- ---------
Loss from continuing
operations - GAAP $ (126) $ (7,898) $ (14,891) $ (16,674)
Adjustments, net of tax:
Partnership level adjustments
(1) (18) 6,343 528 11,364
Impairment charge on CDO
investments - 1,971 3,922 2,776
Loan reserves 31 - 913 -
Loss on sale of loans and
investment securities, net - 260 7,599 11,130
Severance costs 6 - 1,195 -
Resource Residential start-up
costs - - - 333
RCC incentive stock 47 591 782 1,527
Other 23 288 556 303
--------- --------- --------- ---------
Adjusted (loss) income from
continuing operations (2) $ (37) $ 1,555 $ 604 $ 10,759
========= ========= ========= =========
Weighted average diluted shares
outstanding (3) 17,914 18,434 18,461 18,550
========= ========= ========= =========
Adjusted income from continuing
operations per share-diluted $ 0.00 $ 0.08 $ 0.03 $ 0.58
========= ========= ========= =========
-----------------------------
(1) Primarily includes mark-to-market adjustments on investments in
partnerships that the Company manages.
(2) During the nine months ended June 30, 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 (loss)
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
(loss) income from continuing operations should not be considered as an
alternative to loss from continuing operations (computed in accordance
with GAAP). Instead, adjusted (loss) income from continuing operations
should be reviewed in connection with loss 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 672,000
shares for the nine months ended June 30, 2009, and 885,000 and
1,057,000 shares for the three and nine months ended June 30, 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 (LOSS) INCOME TO ADJUSTED OPERATING (LOSS) INCOME
(in thousands)
(unaudited)
Three Months Ended Nine Months Ended
June 30, June 30,
------------------ ------------------
2009 2008 2009 2008
-------- -------- -------- ---------
Revenues
Commercial finance $ 10,547 $ 21,802 $ 39,352 $ 82,432
Real estate 5,198 5,626 17,261 18,790
Financial fund management 6,884 2,017 25,414 22,662
-------- -------- -------- ---------
Total revenues - GAAP 22,629 29,445 82,027 123,884
Adjustments:
Fair value adjustments (1) (263) 9,674 (226) 17,501
-------- -------- -------- ---------
Adjusted revenues (2) $ 22,366 $ 39,119 $ 81,801 $ 141,385
======== ======== ======== =========
Operating (loss) income - GAAP $ (73) $ (905) $ 7,647 $ 34,997
Adjustments:
Fair value adjustments (1) (263) 9,674 (226) 17,501
-------- -------- -------- ---------
Adjusted operating (loss) income
(2) $ (336) $ 8,769 $ 7,421 $ 52,498
======== ======== ======== =========
-----------------------------
(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 (loss) income, both non-GAAP measures, as useful and
appropriate supplements to revenues and operating (loss) 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 (USED IN) 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 $34.5 million for the nine months ended June 30, 2009 a decrease of $1.4 million as compared to net cash provided by operating activities as adjusted of $35.9 million for the nine months ended June 30, 2008. The following reconciles net cash (used in) provided by operating activities of continuing operations to net cash provided by operating activities of continuing operations as adjusted:
Nine Months Ended
June 30,
--------------------
2009 2008
--------- ---------
Net cash (used in) provided by operating activities
of continuing operations $ (33,249) $ 79,508
Adjustments:
Decrease (increase) in commercial finance
investments 32,149 (61,148)
Changes in operating assets and liabilities 18,524 14,627
Proceeds from sales of certain loans and
investment securities 17,050 2,933
--------- ---------
Net cash provided by operating activities of
continuing operations as adjusted $ 34,474 $ 35,920
========= =========
-----------------------------
(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 (used in) provided by operating
activities of continuing operations since it reflects how management
views its liquidity and working capital requirements.
CONTACT: STEVEN KESSLER CHIEF FINANCIAL OFFICER RESOURCE AMERICA, INC. ONE CRESCENT DRIVE, SUITE 203 PHILADELPHIA, PA 19112 215/546-5005 215/546-4785 (fax)
SOURCE: Resource America, Inc.