FOR IMMEDIATE RELEASE
CONTACT: STEVEN KESSLER
CHIEF FINANCIAL OFFICER
RESOURCE AMERICA, INC.
ONE CRESCENT DRIVE, SUITE 203
PHILADELPHIA, PA 19112
215/546-5005, 215/546-4785 (fax)
RESOURCE AMERICA, INC.
REPORTS OPERATING RESULTS
FOR THE SECOND FISCAL QUARTER ENDED MARCH 31, 2008
Philadelphia, PA, May 8, 2008 - Resource America, Inc. (Nasdaq: REXI) (the "Company") reported adjusted income from continuing operations, a non-GAAP measure, of $4.5 million, or $0.24 per common share-diluted and $9.4 million, or $0.50 per common share-diluted for the second fiscal quarter and six months ended March 31, 2008, respectively, as compared to $5.9 million, or $0.31 per common share-diluted and $10.5 million, or $0.55 per common share-diluted for the second fiscal quarter and six months ended March 31, 2007, respectively. A reconciliation of the Company’s reported income (loss) from continuing operations to adjusted income from continuing operations, a non-GAAP measure, is included as Schedule I to this release.
For the second fiscal quarter ended March 31, 2008, the Company reported revenues of $50.4 million, operating income of $20.3 million, and income from continuing operations and net income of $2.0 million, or $0.11 per common share-diluted, as compared to revenues of $32.4 million, operating income of $15.7 million, income from continuing operations of $5.9 million, or $0.31 per common share-diluted and net income of $5.8 million, or $0.31 per common share-diluted for the second fiscal quarter ended March 31, 2007.
For the six months ended March 31, 2008, the Company reported revenues of $94.4 million, operating income of $35.6 million, a loss from continuing operations and a net loss of $9.0 million, or ($0.51) per common share-diluted, as compared to revenues of $56.7 million, operating income of $25.3 million, income from continuing operations of $10.5 million, or $0.55 per common share-diluted and net income of $10.4 million, or $0.55 per common share-diluted for the six months ended March 31, 2007.
Net loss from continuing operations and net loss for the six months ended March 31, 2008 includes an $11.4 million loss, net of tax, incurred during the quarter ended December 31, 2007 in connection with the Company’s decision to terminate its two remaining outstanding financial fund management warehouse credit facilities in the United States and Europe. The Company has now eliminated its exposure to these facilities and has satisfied the guarantees in their entirety. The Company’s March 31, 2008 balance sheet reflects the removal of the assets and the associated liabilities of these facilities.
Jonathan Cohen, President and CEO of the Company, commented, “We are pleased with the continued growth of LEAF Financial and Resource Real Estate, which have benefitted from robust fundraising, new joint ventures and fresh institutional partners. We are now raising our third bank private equity fund to capitalize on opportunities in that space and are launching a CMBS focused real estate fund. We continue to manage the complexities of our Resource Financial Fund Management investments - $14 billion of assets which we manage under long-term contracts. We anticipate further opportunities to sell non-core assets to reduce or eliminate our corporate debt by the end of this fiscal year. Our cost structures globally are being adjusted to reflect the changes in business environment and we expect to see significant cost savings in our fiscal 2009 that begins October 1, 2008. We will also be able to expand our operations as opportunities arise. Overall, we are energized by the opportunities presented to us in this changing marketplace and are taking advantage of them and will continue to.”
On April 22, 2008, our subsidiary LEAF Financial Corporation (“LEAF”) completed the transfer of a portfolio of leases and loans that were acquired in the NetBank acquisition by the sale to LEAF Equipment Leasing Income Fund III, L.P., (“LEAF Fund III”) of LEAF��s remaining 51% membership interest in the special purpose entity that owns the portfolio. LEAF had previously transferred a 49% membership interest in this special purpose entity to LEAF Fund III on January 31, 2008. This entity that owns the portfolio, which is wholly-owned by LEAF Fund III as a result of these sales, remains the borrower on the Morgan Stanley bridge financing. Accordingly, a total of $323.0 million of commercial finance assets were transferred by LEAF to LEAF Fund III together with $315.0 million of related debt financing.
As of March 31, 2008, the Company had, on a consolidated basis, total borrowings outstanding of $884.1 million. After adjusting for the April 22, 2008 transfer of $315.2 million of non-recourse bridge loans at LEAF that financed its acquisition of the NetBank leasing portfolio to LEAF Fund III, the borrowings outstanding will be $568.9 million, including $213.1 million of net liabilities consolidated under FIN 46-R as to which the Company has no recourse; $269.0 million of non-recourse revolving credit facilities at LEAF; $70.0 million of corporate level secured revolving debt; and $16.8 million of other debt, which is principally mortgage debt secured by properties owned by the Company’s subsidiaries.
Assets Under Management
Assets under management increased $3.0 billion, or 21%, to $17.7 billion at March 31, 2008 from $14.7 billion at March 31, 2007.
The following table details the Company’s assets under management by operating segment:
| | |
| | | |
| Financial fund management | $ 14.3 billion | $ 12.7 billion |
| Commercial finance | 1.7 billion | 0.7 billion |
| Real estate | 1.7 billion | 1.3 billion |
| | $ 17.7 billion | $ 14.7 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, 2007.
Book Value
As of March 31, 2008, the Company’s GAAP book value per common share was $8.91 per share. Total stockholders’ equity was $156.1 million as of March 31, 2008 as compared to $185.3 million as of September 30, 2007. Total common shares outstanding were 17,525,420 as of March 31, 2008 as compared to 17,417,307 as of September 30, 2007.
Adjusted book value per common share outstanding, a non-GAAP measure, was $9.33. Adjusted book value is computed by adding back to GAAP book value the unrealized loss on swap transactions associated with the NetBank portfolio that were transferred to LEAF III on April 22, 2008 and by adjusting the unrealized loss related to the Company’s investment in Resource Capital Corp. (NYSE: RSO) utilizing the closing price of May 7, 2008. A reconciliation of the Company’s reported book value to adjusted book value, 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 generate and administer 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.
Highlights for the Second Fiscal Quarter Ended March 31, 2008 and Recent Developments
| ® | On April 25, 2008 LEAF announced that it had successfully completed the public offering of its third public investment partnership, LEAF Fund III, which raised approximately $120.0 million. LEAF Fund III closed within 14 months, 42% ahead of the original two year projected offering period, and utilized a syndicate of more than 70 broker dealers that participated in the offering. This is LEAF's third fund; the first, Lease Equity Appreciation Fund I LP (“LEAF I”) raised approximately $17.1 million in gross offering proceeds; the second, Lease Equity Appreciation Fund II, L.P. (“LEAF II”) raised approximately $60.0 million in gross offering proceeds. |
| ® | LEAF’s assets under management at March 31, 2008 were $1.7 billion, an increase of $968.1 million (131%) from March 31, 2007. LEAF increased its commercial finance originations to $168.9 million for the three months ended March 31, 2008, an increase of $39.0 million (30%) from the three months ended March 31, 2007. |
| ® | 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, increased its assets under management to $1.7 billion at March 31, 2008, an increase of $435.8 million (35%) from March 31, 2007. Since October 1, 2007, Resource Real Estate has acquired $72.6 million in real estate assets for its investment vehicles. |
| ® | Resource Real Estate increased its apartment units under management to 15,230 at March 31, 2008, an increase of 3,677 units (32%) from March 31, 2007. This includes a portfolio of 37 multi-family properties representing approximately 9,400 apartment units managed by Resource Residential, Resource Real Estate’s wholly-owned subsidiary based in Omaha, Nebraska. |
| ® | Resource Real Estate acquired three multi-family residential apartment properties for its fund portfolio with an aggregate acquisition cost of $37.7 million in the second fiscal quarter ended March 31, 2008. |
| ® | The Company’s financial fund management operating segment increased its assets under management at March 31, 2008 to $14.3 billion, an increase of $1.6 billion (13%) from March 31, 2007. |
| ® | The Company’s Board of Directors authorized the payment of a cash dividend to be paid on May 30, 2008 in the amount of $0.07 per share of the Company’s common stock to all holders of record at the close of business on May 16, 2008. |
| ® | Resource Capital Corp. (NYSE: RSO), a real estate investment trust for which the Company is the external manager, announced a dividend distribution of $0.41 per common share for the quarter ended March 31, 2008, unchanged from the quarter ended December 31, 2007 and an increase of $0.02 per common share (5%) from the quarter ended March 31, 2007. |
| ® | The Company generated $35.2 million of cash from operating activities from continuing operations as adjusted during the six months ended March 31, 2008. A reconciliation of net cash provided by (used in) 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 II to this release. |
Statements made in this release include forward-looking statements, which involve substantial risks and uncertainties. The Company’s actual results, performance or achievements could differ materially from those expressed or implied in this release. For information pertaining to risks relating to these forward-looking statements, reference is made to the section “Risk Factors” contained in Item 1A of the Company’s Annual Report on Form 10-K.
The remainder of this release contains the Company’s unaudited consolidated balance sheets, consolidated statements of operations, consolidated statements of cash flows, reconciliation of GAAP income (loss) from continuing operations to adjusted income from continuing operations, reconciliation of net cash provided by (used in) operating activities of continuing operations to net cash provided by operating activities of continuing operations as adjusted, reconciliation of GAAP stockholders’ equity to adjusted book value, restated consolidated balance sheet as of September 30, 2007, restated consolidated statement of operations for the three months ended March 31, 2007, restated consolidated statement of operations for the six months ended March 31, 2007 and restated consolidated statement of cash flows for the six months ended March 31, 2007.
RESOURCE AMERICA, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(unaudited)
| | | | | | | |
| | | | | | (restated) | |
| ASSETS | | | | | | |
Cash | | $ | 11,591 | | | $ | 14,624 | |
Restricted cash | | | 35,569 | | | | 19,340 | |
Receivables | | | 3,496 | | | | 21,255 | |
Receivables from managed entities | | | 30,556 | | | | 20,177 | |
Loans sold, not settled | | | − | | | | 152,706 | |
Loans held for investment, net | | | 227,677 | | | | 285,928 | |
Investments in commercial finance, net | | | 620,226 | | | | 243,391 | |
Investments in real estate, net | | | 49,890 | | | | 49,041 | |
Investment securities available-for-sale, at fair value | | | 35,874 | | | | 51,777 | |
Investments in unconsolidated entities | | | 28,939 | | | | 39,342 | |
Property and equipment, net | | | 15,716 | | | | 12,286 | |
Deferred income taxes | | | 41,944 | | | | 29,877 | |
Goodwill | | | 7,969 | | | | 7,941 | |
Intangible assets, net | | | 4,598 | | | | 4,774 | |
Other assets | | | 31,139 | | | | 18,664 | |
Total assets | | $ | 1,145,184 | | | $ | 971,123 | |
| | | | | | | | | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | | |
Accrued expenses and other liabilities | | $ | 78,389 | | | $ | 60,546 | |
Payables to managed entities | | | 1,038 | | | | 1,163 | |
Borrowings | | | 884,100 | | | | 706,372 | |
Deferred income tax liabilities | | | 11,124 | | | | 11,124 | |
Minority interests | | | 14,392 | | | | 6,571 | |
Total liabilities | | | 989,043 | | | | 785,776 | |
| | | | | | | | | |
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; 27,455,900 and 26,986,975 shares issued, respectively (including nonvested restricted stock of 584,808 and 199,708, respectively) | | | 269 | | | | 268 | |
Additional paid-in capital | | | 266,870 | | | | 264,747 | |
Retained earnings | | | 15,730 | | | | 27,171 | |
Treasury stock, at cost; 9,345,672 and 9,369,960 shares, respectively | | | (101,805 | ) | | | (102,014 | ) |
ESOP loan receivable | | | (211 | ) | | | (223 | ) |
Accumulated other comprehensive loss | | | (24,712 | ) | | | (4,602 | ) |
Total stockholders’ equity | | | 156,141 | | | | 185,347 | |
| | | $ | 1,145,184 | | | $ | 971,123 | |
RESOURCE AMERICA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
| | | Three Months Ended | | | Six Months Ended | |
| | | | | | | |
| | | | | | | | | | | | | |
| | | | | | (restated) | | | | | | (restated) | |
| REVENUES | | | | | | | | | | | | |
| Commercial finance | | $ | 32,666 | | | $ | 8,564 | | | $ | 60,631 | | | $ | 15,653 | |
| Financial fund management | | | 11,023 | | | | 16,804 | | | | 20,645 | | | | 29,430 | |
| Real estate | | | 6,692 | | | | 7,008 | | | | 13,164 | | | | 11,572 | |
| | | | 50,381 | | | | 32,376 | | | | 94,440 | | | | 56,655 | |
| COSTS AND EXPENSES | | | | | | | | | | | | | | | | |
| Commercial finance | | | 12,233 | | | | 4,560 | | | | 21,784 | | | | 8,191 | |
| Financial fund management | | | 6,284 | | | | 5,401 | | | | 12,898 | | | | 9,953 | |
| Real estate | | | 5,326 | | | | 3,195 | | | | 10,792 | | | | 6,208 | |
| General and administrative | | | 3,757 | | | | 2,754 | | | | 7,215 | | | | 5,543 | |
| Provision for credit losses | | | 1,447 | | | | − | | | | 4,220 | | | | 45 | |
| Depreciation and amortization | | | 989 | | | | 719 | | | | 1,955 | | | | 1,428 | |
| | | | 30,036 | | | | 16,629 | | | | 58,864 | | | | 31,368 | |
| OPERATING INCOME | | | 20,345 | | | | 15,747 | | | | 35,576 | | | | 25,287 | |
| | | | | | | | | | | | | | | | | |
| Interest expense | | | (14,595 | ) | | | (7,694 | ) | | | (29,272 | ) | | | (12,285 | ) |
| Minority interests | | | (2,176 | ) | | | (715 | ) | | | (3,267 | ) | | | (1,275 | ) |
| Other income (expense), net | | | 1,292 | | | | 1,811 | | | | (17,076 | ) | | | 4,339 | |
| | | | (15,479 | ) | | | (6,598 | ) | | | (49,615 | ) | | | (9,221 | ) |
Income (loss) from continuing operations before taxes | | | 4,866 | | | | 9,149 | | | | (14,039 | ) | | | 16,066 | |
| Provision (benefit) for income taxes | | | 2,886 | | | | 3,272 | | | | (5,054 | ) | | | 5,585 | |
| Income (loss) from continuing operations | | | 1,980 | | | | 5,877 | | | | (8,985 | ) | | | 10,481 | |
| Income (loss) from discontinued operations, net of tax | | | 3 | | | | (37 | ) | | | (9 | ) | | | (56 | ) |
| NET INCOME (LOSS) | | $ | 1,983 | | | $ | 5,840 | | | $ | (8,994 | ) | | $ | 10,425 | |
| | | | | | | | | | | | | | | | | |
| Basic earnings (loss) per common share: | | | | | | | | | | | | | | | | |
| Continuing operations | | $ | 0.11 | | | $ | 0.34 | | | $ | (0.51 | ) | | $ | 0.60 | |
| Discontinued operations | | | − | | | | − | | | | − | | | | − | |
| Net income (loss) | | $ | 0.11 | | | $ | 0.34 | | | $ | (0.51 | ) | | $ | 0.60 | |
| Weighted average shares outstanding | | | 17,504 | | | | 17,242 | | | | 17,466 | | | | 17,267 | |
| | | | | | | | | | | | | | | | | |
| Diluted earnings (loss) per common share: | | | | | | | | | | | | | | | | |
| Continuing operations | | $ | 0.11 | | | $ | 0.31 | | | $ | (0.51 | ) | | $ | 0.55 | |
| Discontinued operations | | | − | | | | − | | | | − | | | | − | |
| Net income (loss) | | $ | 0.11 | | | $ | 0.31 | | | $ | (0.51 | ) | | $ | 0.55 | |
| Weighted average shares outstanding | | | 18,576 | | | | 19,027 | | | | 17,466 | | | | 19,074 | |
| | | | | | | | | | | | | | | | | |
| Dividends declared per common share | | $ | 0.07 | | | $ | 0.07 | | | $ | 0.14 | | | $ | 0.13 | |
RESOURCE AMERICA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
| | | Six Months Ended | |
| | | | | | | |
| | | | | | (restated) | |
| CASH FLOWS FROM OPERATING ACTIVITIES: | | | | | | |
| Net (loss) income | | $ | (8,994 | ) | | $ | 10,425 | |
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities, net of acquisitions: | | | | | | | | |
Impairment charge on collateralized debt obligation investments | | | 1,149 | | | | − | |
Depreciation and amortization | | | 2,509 | | | | 1,721 | |
Provision for credit losses | | | 4,220 | | | | 45 | |
Minority interests | | | 3,267 | | | | 1,275 | |
Equity in losses (earnings) of unconsolidated entities | | | 1,373 | | | | (8,939 | ) |
Distributions from unconsolidated entities | | | 8,658 | | | | 7,852 | |
Loss on sales of loans | | | 18,530 | | | | − | |
Gain on sales of assets | | | (2,033 | ) | | | (5,307 | ) |
Deferred income tax benefit | | | 735 | | | | (3,603 | ) |
Non-cash compensation on long-term incentive plans | | | 2,388 | | | | 1,316 | |
Non-cash compensation issued | | | 62 | | | | 1,174 | |
Non-cash compensation received | | | 356 | | | | (1,396 | ) |
| Decrease (increase) in commercial finance investments | | | 31,876 | | | | (92,246 | ) |
| Changes in operating assets and liabilities | | | (36,948 | ) | | | (5,211 | ) |
| Net cash provided by (used in) operating activities of continuing operations | | | 27,148 | | | | (92,894 | ) |
| CASH FLOWS FROM INVESTING ACTIVITIES: | | | | | | | | |
| Capital expenditures | | | (5,549 | ) | | | (1,494 | ) |
| Payments received on real estate loans and real estate | | | 8,104 | | | | 8,401 | |
| Investments in real estate | | | (4,074 | ) | | | (10,163 | ) |
| Purchase of investments | | | (239,551 | ) | | | (9,881 | ) |
| Proceeds from sale of investments | | | 5,215 | | | | 4,694 | |
| Principal payments received on loans | | | 6,126 | | | | − | |
| Net cash paid for acquisitions | | | (8,022 | ) | | | − | |
| Increase in other assets | | | (3,795 | ) | | | (1,775 | ) |
| Net cash used in investing activities of continuing operations | | | (241,546 | ) | | | (10,218 | ) |
| CASH FLOWS FROM FINANCING ACTIVITIES: | | | | | | | | |
| Increase in borrowings | | | 616,335 | | | | 356,944 | |
| Principal payments on borrowings | | | (385,314 | ) | | | (262,651 | ) |
| Minority interest contributions | | | 315 | | | | − | |
| Minority interest distributions | | | (1,243 | ) | | | (968 | ) |
| Dividends paid | | | (2,447 | ) | | | (2,287 | ) |
| Increase in restricted cash | | | (16,229 | ) | | | (8,969 | ) |
| Proceeds from issuance of stock | | | 182 | | | | 927 | |
| Purchase of treasury stock | | | (237 | ) | | | − | |
| Tax benefit from the exercise of stock options | | | − | | | | 1,887 | |
| Net cash provided by financing activities of continuing operations | | | 211,362 | | | | 84,883 | |
| CASH FLOWS FROM DISCONTINUED OPERATIONS: | | | | | | | | |
| Operating activities | | | 3 | | | | (49 | ) |
| Financing activities | | | − | | | | (1,145 | ) |
| Net cash provided by (used in) discontinued operations | | | 3 | | | | (1,194 | ) |
| Decrease in cash | | | (3,033 | ) | | | (19,423 | ) |
| Cash at beginning of period | | | 14,624 | | | | 37,622 | |
| Cash at end of period | | $ | 11,591 | | | $ | 18,199 | |
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 this non-GAAP measure in its analysis of the exclusion of certain adjustments recorded in the Company’s six months ended March 31, 2008. Management believes the presentation of this financial measure excluding the impact of these items provides useful supplemental information that is essential to a proper understanding of the financial results of the Company. This disclosure should not be viewed as a substitute for results determined in accordance with GAAP, nor is it necessarily comparable to non-GAAP performance measures that may be presented by other companies.
SCHEDULE I
RECONCILIATION OF GAAP INCOME (LOSS) FROM CONTINUING OPERATIONS
TO ADJUSTED INCOME FROM CONTINUING OPERATIONS
(in thousands, except per share data)
(unaudited)
| | | Three Months Ended | | | Six Months Ended | |
| | | | | | | |
| | | | | | | | | | | | | |
| | | | | | (restated) | | | | | | (restated) | |
| Income (loss) from continuing operations − GAAP | | $ | 1,980 | | | $ | 5,877 | | | $ | (8,985 | ) | | $ | 10,481 | |
| Adjustments, net of tax: | | | | | | | | | | | | | | | | |
Resource residential start-up costs | | | − | | | | − | | | | 349 | | | | − | |
Impairment charge on CDO investments | | | 84 | | | | − | | | | 735 | | | | − | |
(Recovery) loss on sales of loans | | | (342 | ) | | | − | | | | 11,390 | | | | − | |
Partnership mark-to-market impact | | | 651 | | | | − | | | | 4,920 | | | | − | |
RCC incentive stock | | | 950 | | | | − | | | | 950 | | | | − | |
Tax rate normalization | | | 1,134 | | | | − | | | | − | | | | − | |
Adjusted income from continuing operations (1) | | $ | 4,457 | | | $ | 5,877 | | | $ | 9,359 | | | $ | 10,481 | |
| | | | | | | | | | | | | | | | | |
Weighted average diluted shares outstanding (2) | | | 18,576 | | | | 19,027 | | | | 18,608 | | | | 19,074 | |
| | | | | | | | | | | | | | | | | |
| Adjusted income from continuing operations per share-diluted | | $ | 0.24 | | | $ | 0.31 | | | $ | 0.50 | | | $ | 0.55 | |
| (1) | During the six months ended March 31, 2008, in connection with substantial volatility and reduction in liquidity in the global credit markets, the Company recorded several significant adjustments. For comparability purposes, the Company is presenting adjusted income from continuing operations because it facilitates the evaluation of the Company without the effect of these adjustments. Adjusted income from continuing operations should not be considered as an alternative to income (loss) from continuing operations (computed in accordance with GAAP). Instead, adjusted income from continuing operations should be reviewed in connection with income (loss) from continuing operations in the Company’s consolidated financial statements, to help analyze how the Company’s business is performing. |
| (2) | Includes 1,142,000 diluted shares not used in the calculation of loss from continuing operations per share-diluted for the six months ended March 31, 2008. |
SCHEDULE II
RECONCILIATION OF NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES OF CONTINUING OPERATIONS TO
NET CASH PROVIDED BY OPERATING ACTIVITIES OF CONTINUING OPERATIONS AS ADJUSTED
Net cash provided by operating activities of continuing operations as adjusted was $35.2 million for the six months ended March 31, 2008, an increase of $24.3 million as compared to net cash provided by operating activities of $10.8 million in the six months ended March 31, 2007. The following reconciles net cash provided by (used in) operating activities of continuing operations to net cash provided by operating activities of continuing operations as adjusted (in thousands):
| | | Six Months Ended | |
| | | | |
| | | | | | | |
| | | | | | (restated) | |
| Net cash provided by (used in) operating activities of continuing operations | | $ | 27,148 | | | $ | (92,894 | ) |
| | | | | | | | | |
| Adjustments: | | | | | | | | |
(Decrease) increase in commercial finance investments | | | (31,876 | ) | | | 92,246 | |
Changes in operating assets and liabilities | | | 36,948 | | | | 5,211 | |
Proceeds from sales of investments | | | 2,933 | | | | 6,268 | |
Net cash provided by operating activities of continuing operations s adjusted | | $ | 35,153 | | | $ | 10,831 | |
SCHEDULE III
RECONCILIATION OF GAAP STOCKHOLDERS’ EQUITY TO ADJUSTED BOOK VALUE
(in thousands, except per share data)
(unaudited)
| | | As of | |
| Stockholders’ equity - GAAP | | $ | 156,141 | |
| Add: | | | | |
Unrealized losses – NetBank interest rate swap contracts | | | 5,480 | |
Appreciation in investment in Resource Capital Corp | | | 1,958 | |
| Adjusted book value | | $ | 163,579 | |
| Shares outstanding | | $ | 17,525 | |
| Adjusted book value per share | | $ | 9.33 | |
SCHEDULE IV
RESTATED CONSOLIDATED BALANCE SHEET
(in thousands, except per share data)
(unaudited)
The following sets forth the effect of the restatement on the applicable line items in the Company’s consolidated balance sheet as of September 30, 2007 (unaudited):
| | | | | | | | | | |
| | | (as filed) | | | | | | (restated) | |
| ASSETS | | | | | | | | | |
Cash | | $ | 14,624 | | | $ | − | | | $ | 14,624 | |
Restricted cash | | | 19,340 | | | | | | | | 19,340 | |
Receivables | | | 21,255 | | | | | | | | 21,255 | |
Receivables from managed entities | | | 20,177 | | | | | | | | 20,177 | |
Loans sold, not settled | | | 152,706 | | | | | | | | 152,706 | |
Loans held for investment, net | | | 285,928 | | | | | | | | 285,928 | |
Investments in commercial finance, net | | | 243,391 | | | | | | | | 243,391 | |
Investments in real estate, net | | | 49,041 | | | | | | | | 49,041 | |
Investment securities available-for-sale | | | 51,777 | | | | | | | | 51,777 | |
Investments in unconsolidated entities | | | 36,777 | | | | 2,565 | | | | 39,342 | |
Property and equipment, net | | | 12,286 | | | | | | | | 12,286 | |
Deferred income taxes | | | 30,995 | | | | (1,118 | ) | | | 29,877 | |
Goodwill | | | 7,941 | | | | | | | | 7,941 | |
Intangible assets, net | | | 4,774 | | | | | | | | 4,774 | |
Other assets | | | 18,664 | | | | | | | | 18,664 | |
Total assets | | $ | 969,676 | | | $ | 1,447 | | | $ | 971,123 | |
| | | | | | | | | | | | | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | | | | | | |
Accounts payable, accrued expenses and other liabilities | | $ | 60,546 | | | $ | − | | | $ | 60,546 | |
Payables to managed entities | | | 1,163 | | | | | | | | 1,163 | |
Borrowings | | | 706,372 | | | | | | | | 706,372 | |
Deferred income tax liabilities | | | 11,124 | | | | | | | | 11,124 | |
Minority interests | | | 6,571 | | | | | | | | 6,571 | |
Total liabilities | | | 785,776 | | | | − | | | | 785,776 | |
| | | | | | | | | | | | | |
Commitments and contingencies | | | − | | | | − | | | | − | |
| | | | | | | | | | | | | |
| Stockholders’ equity: | | | | | | | | | | | | |
Preferred stock, $1.00 par value, 1,000,000 shares authorized; none outstanding | | | - | | | | - | | | | - | |
Common stock, $.01 par value, 49,000,000 shares authorized; 26,986,975 shares issued (including unvested restricted stock of 199,708) | | | 268 | | | | | | | | 268 | |
Additional paid-in capital | | | 264,747 | | | | | | | | 264,747 | |
Retained earnings | | | 25,724 | | | | 1,447 | | | | 27,171 | |
Treasury stock, at cost; 9,369,960 shares | | | (102,014 | ) | | | | | | | (102,014 | ) |
ESOP loan receivable | | | (223 | ) | | | | | | | (223 | ) |
Accumulated other comprehensive loss | | | (4,602 | ) | | | | | | | (4,602 | ) |
Total stockholders’ equity | | | 183,900 | | | | 1,447 | | | | 185,347 | |
| | | $ | 969,676 | | | $ | 1,447 | | | $ | 971,123 | |
SCHEDULE V
RESTATED CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except per share data)
(unaudited)
The following sets forth the effect of the restatement on the applicable line items in the Company’s consolidated statement of operations for the three months ended March 31, 2007:
| | | | | | | | | | |
| | | (as filed) | | | | | | (restated) | |
| REVENUES | | | | | | | | | |
| Commercial finance | | $ | 8,564 | | | $ | − | | | $ | 8,564 | |
| Financial fund management | | | 16,030 | | | | 774 | | | | 16,804 | |
| Real estate | | | 7,008 | | | | | | | | 7,008 | |
| | | | 31,602 | | | | 774 | | | | 32,376 | |
| COSTS AND EXPENSES | | | | | | | | | | | | |
| Commercial finance | | | 4,560 | | | | | | | | 4,560 | |
| Financial fund management | | | 5,401 | | | | | | | | 5,401 | |
| Real estate | | | 3,195 | | | | | | | | 3,195 | |
| General and administrative | | | 2,754 | | | | | | | | 2,754 | |
| Depreciation and amortization | | | 719 | | | | | | | | 719 | |
| | | | 16,629 | | | | − | | | | 16,629 | |
| OPERATING INCOME | | | 14,973 | | | | 774 | | | | 15,747 | |
| | | | | | | | | | | | | |
| Interest expense | | | (7,694 | ) | | | | | | | (7,694 | ) |
| Minority interests | | | (715 | ) | | | | | | | (715 | ) |
| Other income, net | | | 1,811 | | | | | | | | 1,811 | |
| | | | (6,598 | ) | | | − | | | | (6,598 | ) |
| Income from continuing operations before taxes | | | 8,375 | | | | 774 | | | | 9,149 | |
| Provision for income taxes | | | 2,955 | | | | 317 | | | | 3,272 | |
| Income from continuing operations | | | 5,420 | | | | 457 | | | | 5,877 | |
| Loss from discontinued operations, net of tax | | | (37 | ) | | | − | | | | (37 | ) |
| NET INCOME | | $ | 5,383 | | | $ | 457 | | | $ | 5,840 | |
| Basic earnings per common share: | | | | | | | | | | | | |
| Continuing operations | | $ | 0.31 | | | $ | 0.03 | | | $ | 0.34 | |
| Discontinued operations | | | − | | | | − | | | | − | |
| Net income | | $ | 0.31 | | | $ | 0.03 | | | $ | 0.34 | |
| Weighted average shares outstanding | | | 17,242 | | | | 17,242 | | | | 17,242 | |
| Diluted earnings per common share: | | | | | | | | | | | | |
| Continuing operations | | $ | 0.29 | | | $ | 0.02 | | | $ | 0.31 | |
| Discontinued operations | | | − | | | | − | | | | − | |
| Net income | | $ | 0.29 | | | $ | 0.02 | | | $ | 0.31 | |
| Weighted average shares outstanding | | | 19,027 | | | | 19,027 | | | | 19,027 | |
| | | | | | | | | | | | | |
| Dividends declared per common share | | $ | 0.07 | | | | | | | $ | 0.07 | |
SCHEDULE VI
RESTATED CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except per share data)
(unaudited)
The following sets forth the effect of the restatement on the applicable line items in the Company’s consolidated statement of operations for the six months ended March 31, 2007:
| | | | | | | | | | |
| | | (as filed) | | | | | | (restated) | |
| REVENUES | | | | | | | | | |
| Commercial finance | | $ | 15,653 | | | $ | − | | | $ | 15,653 | |
| Financial fund management | | | 28,417 | | | | 1,013 | | | | 29,430 | |
| Real estate | | | 11,572 | | | | | | | | 11,572 | |
| | | | 55,642 | | | | 1,013 | | | | 56,655 | |
| COSTS AND EXPENSES | | | | | | | | | | | | |
| Commercial finance | | | 8,191 | | | | | | | | 8,191 | |
| Financial fund management | | | 9,953 | | | | | | | | 9,953 | |
| Real estate | | | 6,208 | | | | | | | | 6,208 | |
| General and administrative | | | 5,543 | | | | | | | | 5,543 | |
| Provision for credit losses | | | 45 | | | | | | | | 45 | |
| Depreciation and amortization | | | 1,428 | | | | | | | | 1,428 | |
| | | | 31,368 | | | | − | | | | 31,368 | |
| OPERATING INCOME | | | 24,274 | | | | 1,013 | | | | 25,287 | |
| | | | | | | | | | | | | |
| Interest expense | | | (12,285 | ) | | | | | | | (12,285 | ) |
| Minority interests | | | (1,275 | ) | | | | | | | (1,275 | ) |
| Other income, net | | | 4,339 | | | | | | | | 4,339 | |
| | | | (9,221 | ) | | | − | | | | (9,221 | ) |
| Income from continuing operations before taxes | | | 15,053 | | | | 1,013 | | | | 16,066 | |
| Provision for income taxes | | | 5,165 | | | | 420 | | | | 5,585 | |
| Income from continuing operations | | | 9,888 | | | | 593 | | | | 10,481 | |
| Loss from discontinued operations, net of tax | | | (56 | ) | | | − | | | | (56 | ) |
| NET INCOME | | $ | 9,832 | | | $ | 593 | | | $ | 10,425 | |
| Basic earnings per common share: | | | | | | | | | | | | |
| Continuing operations | | $ | 0.57 | | | $ | 0.03 | | | $ | 0.60 | |
| Discontinued operations | | | − | | | | − | | | | − | |
| Net income | | $ | 0.57 | | | $ | 0.03 | | | $ | 0.60 | |
| Weighted average shares outstanding | | | 17,267 | | | | 17,267 | | | | 17,267 | |
| Diluted earnings per common share: | | | | | | | | | | | | |
| Continuing operations | | $ | 0.52 | | | $ | 0.03 | | | $ | 0.55 | |
| Discontinued operations | | | − | | | | − | | | | − | |
| Net income | | $ | 0.52 | | | $ | 0.03 | | | $ | 0.55 | |
| Weighted average shares outstanding | | | 19,074 | | | | 19,074 | | | | 19,074 | |
| | | | | | | | | | | | | |
| Dividends declared per common share | | $ | 0.13 | | | | | | | $ | 0.13 | |
SCHEDULE VII
RESTATED CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands, except per share data)
(unaudited)
The following sets forth the effect of the restatement on the applicable line items in the Company’s consolidated statement of cash flows for the six months ended March 31, 2007:
| | | | | | | | | | |
| | | (as filed) | | | | | | (restated) | |
| CASH FLOWS FROM OPERATING ACTIVITIES: | | | | | | | | | |
| Net income | | $ | 9,832 | | | $ | 593 | | | $ | 10,425 | |
Adjustments to reconcile net income to net cash used in operating activities, net of acquisitions: | | | | | | | | | | | | |
Depreciation and amortization | | | 1,721 | | | | | | | | 1,721 | |
Provision for credit losses | | | − | | | | 45 | | | | 45 | |
Equity in earnings of unconsolidated entities | | | (7,926 | ) | | | (1,013 | ) | | | (8,939 | ) |
Minority interests | | | 1,275 | | | | | | | | 1,275 | |
Distributions from unconsolidated entities | | | 7,852 | | | | | | | | 7,852 | |
Gains on sales of assets | | | (5,307 | ) | | | | | | | (5,307 | ) |
Deferred income tax benefit | | | (4,023 | ) | | | 420 | | | | (3,603 | ) |
Non-cash compensation on long-term incentive plans | | | 1,316 | | | | | | | | 1,316 | |
Non-cash compensation issued | | | 1,174 | | | | | | | | 1,174 | |
Non-cash compensation received | �� | | (1,396 | ) | | | | | | | (1,396 | ) |
| Decrease in commercial finance investments | | | (92,246 | ) | | | | | | | (92,246 | ) |
| Changes in operating assets and liabilities | | | (5,166 | ) | | | (45 | ) | | | (5,211 | ) |
| Net cash used in operating activities of continuing operations | | | (92,894 | ) | | $ | − | | | | (92,894 | ) |
