<PAGE>
Securities and Exchange Commission
Washington, D.C. 20549
Form 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1998
---------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
-------------------- -----------------
Commission file number 0-4408
--------
RESOURCE AMERICA, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 72-0654145
- ------------------------------- -----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1521 Locust Street, Philadelphia, Pennsylvania 19102
----------------------------------------------------
(Address of principal executive offices)
(215) 546-5005
----------------------------------------------------
(Registrant's telephone number, including area code)
--------------------------------------------
(Former name, former address, and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
20,195,331 Shares July 24, 1998
<PAGE>
RESOURCE AMERICA, INC.
INDEX
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - June 30, 1998 (Unaudited)
and September 30, 1997...................................................... 3-4
Consolidated Statements of Income (Unaudited)
Three Months and Nine Months Ended June 30, 1998
and 1997.................................................................... 5
Consolidated Statement of Changes in Stockholders' Equity
(Unaudited) Nine Months Ended June 30, 1998................................ 6
Consolidated Statements of Cash Flows (Unaudited)
Nine Months Ended June 30, 1998 and 1997.................................... 7-8
Notes to Consolidated Financial Statements (Unaudited)........................ 9-13
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................................... 14-23
PART II. OTHER INFORMATION
Item 6. Exhibits
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
RESOURCE AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
================================================================================
<TABLE>
<CAPTION>
June 30, September 30,
1998 1997
----------- -------------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents............................... $ 84,370 $ 69,279
Accounts and notes receivable........................... 3,020 2,414
Prepaid expenses and other current assets............... 2,216 576
-------- --------
Total Current Assets........................... 89,606 72,269
Investments in Real Estate Loans
(less allowance for possible losses of $814
and $400) ........................................ 188,996 88,816
Investments in Leases and Notes Receivable
(less allowance for possible losses of $843
and $248) ......................................... 19,728 8,152
Investment in Resource Asset Investment Trust................. 13,323 --
Property and Equipment
Oil and gas properties and equipment
(successful efforts).................................. 25,618 24,939
Gas gathering and transmission facilities............... 1,628 1,606
Other ............................................... 4,614 2,874
-------- --------
31,860 29,419
Less - accumulated depreciation, depletion,
and amortization...................................... (16,440) (15,793)
-------- -------
15,420 13,626
Other Assets
(less accumulated amortization of $2,238
and $1,014).............................................. 14,946 12,256
-------- ---------
$342,019 $195,119
======== =========
</TABLE>
3
<PAGE>
RESOURCE AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
(continued)
================================================================================
<TABLE>
<CAPTION>
June 30, September 30,
1998 1997
--------- -------------
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current maturities of long-term debt.................... $ 679 $ 708
Borrowings under credit facilities...................... 3,149 --
Accounts payable........................................ 3,008 1,339
Accrued interest........................................ 5,790 2,734
Accrued liabilities..................................... 3,974 1,967
Estimated income taxes.................................. 1,171 4,093
-------- ---------
Total Current Liabilities............................... 17,771 10,841
Long-term Debt, Less Current Maturities....................... 117,548 118,786
Deferred Income Taxes......................................... 727 --
Other Long-term Liabilities................................... 1,541 663
Commitments and Contingencies................................. -- --
Stockholders' Equity
Preferred stock, $1.00 par value, 1,000,000
authorized shares................................... -- --
Common stock, $.01 par value, 49,000,000
authorized shares..................................... 209 54
Unrealized gain on investment reported at
fair value, net of tax................................ 930 --
Additional paid-in capital.............................. 178,697 56,787
Retained earnings....................................... 38,884 22,005
Less treasury stock, at cost............................ (13,967) (13,664)
Less loan receivable from Employee
Stock Option Plan ("ESOP")............................ (321) (353)
------------ -----------
Total Stockholders' Equity.............................. 204,432 64,829
--------- ---------
$342,019 $195,119
======== ========
</TABLE>
4
<PAGE>
RESOURCE AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(in thousands except per share data)
================================================================================
<TABLE>
<CAPTION>
Three Months Nine Months
Ended June 30 Ended June 30
------------------ ------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues
Real estate finance...................................... $18,541 $4,451 $43,808 $11,448
Equipment leasing........................................ 3,361 1,867 9,985 4,743
Energy:production........................................ 1,014 1,024 3,294 2,922
:services.......................................... 507 420 1,577 1,169
Interest and other....................................... 1,699 65 2,840 264
------- -------- ------- ---------
25,122 7,827 61,504 20,546
Costs and Expenses
Real estate finance...................................... 3,120 241 7,628 907
Equipment leasing........................................ 1,113 962 3,903 2,762
Energy:production and exploration........................ 767 459 1,912 1,296
:services.......................................... 274 206 882 652
General and administrative............................... 1,059 636 3,275 1,572
Depreciation and amortization............................ 732 390 1,948 1,161
Interest................................................. 5,685 703 13,726 1,721
Provision for possible losses............................ 263 157 1,204 303
-------- ------- ------- --------
13,013 3,754 34,478 10,374
------ ------ ------ -------
Income from Operations................................... 12,109 4,073 27,026 10,172
Other Income
Gain on sale of property................................. 8 1 11 72
---------- ---------- ---------- --------
Income before income taxes............................... 12,117 4,074 27,037 10,244
Provision for income taxes............................... 3,750 1,144 8,400 2,494
------- -------- -------- -------
Net Income............................................... $8,367 $ 2,930 $18,637 $ 7,750
====== ======== ======= =======
Net Income per Common Share - Basic $ .46 $ .27 $ 1.20 $ .81
======== ======== ======= =======
Weighted Average Common Shares
Outstanding............................................ 18,189 10,687 15,544 9,627
======= ======= ======= =======
Net Income per Common Share - Diluted $ .45 $ .21 $ 1.16 $ .61
======= ======= ======= =======
Weighted Average Common Shares........................... 18,794 13,907 16,087 12,710
====== ======= ======= ======
</TABLE>
5
<PAGE>
RESOURCE AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
NINE MONTHS ENDED JUNE 30, 1998
(Unaudited)
(in thousands, except number of shares and share issuance data)
<TABLE>
<CAPTION>
Unrealized
Gain on
Investment
Common Stock Reported at Additional
------------ Fair Value, Paid-In Retained
Shares Amount Net of Tax Capital Earnings
______________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Balance, October 1, 1997 5,410,645 $54 $-- $56,787 $22,005
______________________________________________________________________________________________
Treasury shares issued 133
Issuance of common stock 2,042,045 20 121,777
Unrealized net gain on
Investment 930
Treasury shares acquired
Dividends ($.10 per share) (1,623)
3-for-1 stock split effected
in the form of a 200%
stock dividend 13,452,922 135 (135)
Repayment of ESOP loan
Net income 18,637
---------- ---- ---- -------- -------
Balance, June 30, 1998 20,905,612 $209 $930 $178,697 $38,884
========== ==== ==== ======== =======
</TABLE>
<PAGE>
RESTUBBED TABLE
RESOURCE AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
NINE MONTHS ENDED JUNE 30, 1998
(Unaudited)
(in thousands, except number of shares and share issuance data)
<TABLE>
<CAPTION>
Treasury Stock ESOP Total
---------------------- Loan Stockholders'
Shares Amount Receivable Equity
_______________________________________________________________________________________
<S> <C> <C> <C> <C>
Balance, October 1, 1997 (709,048) ($13,664) ($353) $64,829
________________________________________________________________________________________
Treasury shares issued 6,479 137 270
Issuance of common stock 121,797
Unrealized net gain on
Investment 930
Treasury shares acquired (10,000) (440) (440)
Dividends ($.10 per share) (1,623)
3-for-1 stock split effected
in the form of a 200%
stock dividend --
Repayment of ESOP loan 32 32
Net income 18,637
--------- --------- ------ --------
Balance, June 30, 1998 (712,569) ($13,967) ($321) $204,432
========= ========= ====== ========
</TABLE>
6
<PAGE>
RESOURCE AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
================================================================================
<TABLE>
<CAPTION>
Nine Months Ended June 30
-------------------------
1998 1997
---- ----
<S> <C> <C>
Cash Flows from Operating Activities:
Net income....................................................... $18,637 $7,750
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization.................................. 1,948 1,161
Property impairments........................................... 262 3
Amortization of discount on senior notes and
deferred finance costs....................................... 1,450 86
Provision for possible losses.................................. 1,204 303
Collection of interest income.................................. 4,263 432
Accretion of discount.......................................... (5,872) (2,603)
Deferred income taxes.......................................... 308 894
Gains on asset dispositions.................................... (28,123) (6,043)
Change in operating assets and liabilities net of effects from
purchase of subsidiaries:
(Increase) decrease in accounts receivable................... (606) 333
Increase in prepaid expenses and other
current assets............................................. (1,640) (196)
Increase in accounts payable................................. 1,620 78
Increase in other current liabilities........................ 2,240 636
------- --------
Net Cash (Used in) Provided by Operating Activities.............. (4,309) 2,834
Investing Activities:
Acquisition of business, less cash acquired...................... (997) --
Cost of equipment acquired for lease............................. (59,536) (21,201)
Capital expenditures............................................. (3,271) (1,814)
Proceeds from sales or refinancings of assets.................... 245,072 20,749
Principal payments on notes receivable........................... 6,301 2,843
Payments received in excess of revenue
recognized on leases and mortgages............................. 2,520 1,336
Increase in other assets......................................... (12,409) (4,031)
Increase in other long-term liabilities.......................... 878 --
Investments in real estate loans................................. (277,801) (35,130)
-------- -------
Net Cash Used in Investing Activities............................ (99,243) (37,248)
</TABLE>
7
<PAGE>
RESOURCE AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
(continued)
================================================================================
<TABLE>
<CAPTION>
Nine Months Ended June 30
-------------------------
1998 1997
---- ----
<S> <C> <C>
Financing Activities:
Long-term borrowings.................................................. $ 60,000 $ 19,995
Short-term borrowings................................................. 62,727 8,850
Proceeds from issuance of common stock................................ 119,567 19,677
Dividends paid ($.10 per share)....................................... (1,623) (876)
Principal payments on long-term borrowings............................ (61,235) (5,603)
Principal payments on short-term borrowings........................... (59,578) (8,850)
Increase in other assets.............................................. (775) (43)
Purchase of treasury stock............................................ (440) --
-------- ---------
Net Cash Provided by Financing Activities................................. 118,643 33,150
Increase (Decrease) in Cash and Cash Equivalents.......................... 15,091 (1,264)
Cash and Cash Equivalents at Beginning of Period.......................... 69,279 4,154
------ --------
Cash and Cash Equivalents at End of Period................................ $ 84,370 $ 2,890
======== ========
</TABLE>
8
<PAGE>
RESOURCE AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Management's Opinion Regarding Interim Financial Statements
In the opinion of management, all adjustments (consisting of normal
recurring accruals) necessary for a fair statement of the results of operations
for the interim period included herein have been made.
Certain reclassifications have been made to the consolidated financial
statements for the quarter and nine months ended June 30, 1997 to conform with
the quarter and nine months ended June 30, 1998.
Unless otherwise indicated, all information set forth herein gives effect
to the three-for-one stock split (effected in the form of a 200% stock dividend)
in June 1998.
The accounting policies followed by the Company are set forth in Note 1 to
the Company's consolidated financial statements included in the Company's Annual
Report on Form 10-K for the fiscal year ended September 30, 1997.
Note 2 - Cash Flow Statements
Supplemental disclosure of cash flow information:
<TABLE>
<CAPTION>
Nine Months Ended
June 30
------------------
1998 1997
---- ----
(in thousands)
<S> <C> <C>
Cash paid during the period for:
Interest...................................... $ 9,221 $ 1,722
Income taxes.................................. $ 10,870 $ 1,530
Non-cash activities include the following:
Notes received in exchange for:
Sales of leases............................. $ 9,116 $ 5,700
Sales of residential mortgage loans......... 6,588 3,500
Stock issued in acquisition................... 2,500 --
Debt assumed upon acquisition of
real estate loan............................. -- 2,381
Details of acquisition:
Fair value of assets acquired................. $ 3,545 $ --
Liabilities assumed........................... (48) --
Stock issued.................................. (2,500) --
-------- --------
Net cash paid................................. $ 997 $ --
======== ========
</TABLE>
9
<PAGE>
RESOURCE AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(Unaudited)
Note 3 - Investments in Real Estate Loans
The Company has focused its commercial mortgage loan activities on the
purchase of income producing mortgage loans at a discount to both the face value
of such loans and the appraised value of the properties underlying the loans.
The Company records the accrual of a portion of the discount to the underlying
collateral value as revenue. This "accretion of discount" amounted to $2.3
million and $1.1 million during the quarters ended June 30, 1998 and 1997,
respectively, and $5.9 million and $2.6 million during the nine months ended
June 30, 1998 and 1997, respectively. Cash received by the Company as payment on
each mortgage loan is allocated between principal and interest, and as the
Company sells senior lien interests or receives funds from refinancings of such
loans, a portion of the cash received is utilized to reduce the cumulative
accretion of discount included in the carrying value of the Company's
investments in real estate loans. The Company received cash in connection with
previously accreted discounts of $1.5 million and $258,000 during the quarters
ended June 30, 1998 and 1997, respectively, and $4.3 million and $432,000 during
the nine months ended June 30, 1998 and 1997, respectively.
At June 30, 1998, the Company held commercial mortgage loans having an
aggregate face value of $521.0 million, which were carried at an aggregate cost
of $179.8 million, including cumulative accretion of $5.0 million.
One loan, in which a senior lien interest was sold at a gain of $4.9
million, was acquired pursuant to an order (the "Order") of the United States
Bankruptcy Court for the District of Columbia that was in effect at the time the
Company acquired the loan. Pursuant to the Order, the Company had the right to
cause title to the property underlying the loan to be transferred on or before
June 30, 1998. To maintain control of the property (which the Company deemed
necessary to protect its investment), the Company exercised its right and caused
title to the property to be transferred to a limited partnership in which a
subsidiary of the Company is the general partner (with a 1% interest) and the
Chairman, President and Vice-Chairman of the Company are limited partners (with
a 95% interest; the remaining 5% is held by an unrelated party). These officers
have agreed that any economic benefit resulting from resale of this interest
will be paid to the Company.
10
<PAGE>
RESOURCE AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(Unaudited)
The following is a summary of the changes in the carrying value of the
Company's investments in real estate loans for the periods indicated.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, 1998 June 30, 1998
---------------------- ----------------
<S> <C> <C>
(in thousands)
Balance, beginning of period..................... $182,624 $ 88,816
New loans........................................ 70,906 213,141
Additions to existing loans...................... 2,471 5,116
Allowance for possible losses.................... (91) (225)
Accretion of discount............................ 2,275 5,872
Collections of principal......................... -- (35,250)
Cost of loans sold............................... (70,128) (97,717)
Increase (decrease) in investments in
residential mortgage loans...................... 939 9,243
-------- --------
Balance, end of period........................... $188,996 $188,996
======== ========
</TABLE>
Note 4- Investments in Leases and Notes Receivable
Components of the investments in leases and notes receivable consist of
the net investment in direct financing leases and notes secured by equipment
leases as follows:
June 30, 1998
-------------
(in thousands)
Total future minimum lease payments receivable $ 5,234
Initial direct costs, net of amortization 101
Unguaranteed residuals 2,936
Unearned lease income (2,103)
-------
Net investment in direct financing leases 6,168
Notes receivable 14,403
Allowance for possible losses (843)
-------
Investments in leases and notes receivable $19,728
=======
11
<PAGE>
RESOURCE AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(Unaudited)
Note 5 - Long-Term Debt
Long-term debt consists of the following:
<TABLE>
<CAPTION>
June 30, 1998 September 30, 1997
------------- ------------------
(in thousands)
<S> <C> <C>
12% senior unsecured notes payable, interest
due semi-annually, principal due August 2004...................... $115,000 $115,000
Loan payable to a bank, secured by a certificate
of deposit, 20 equal semi-annual principal installments
of $32,143 through February 2003, and quarterly
payments of interest at the prime rate
(8.5% at June 30, 1998) plus 1/2% through 2003 ................... 321 353
Loans payable, secured by real estate, monthly
installments totaling approximately $20,000 including
interest ranging from prime (8.5% at June 30,
1998) to 9.6%, due at various times from
December 2001 through November 2010............................... 2,444 3,216
Unsecured note payable, due in March 1999
including interest at 12 month LIBOR (6 9/32% at
June 30, 1998).................................................... 462 925
-------- --------
118,227 119,494
Less current maturities........................................... 679 708
-------- --------
$117,548 $118,786
======== ========
</TABLE>
As of June 30, 1998, the long-term debt maturing over the next five
years ended June 30 is as follows: 1999 - $679,000; 2000 - $232,000; 2001 -
$249,000; 2002 - $248,000; and 2003 - $202,000.
Note 6 - Investment in Resource Asset Investment Trust
In January 1998, the Company acquired 500,000 shares (15% of the
outstanding shares) of Resource Asset Investment Trust ("RAIT"), a newly-formed
real estate investment trust sponsored by the Company, for $7.0 million. In
connection with the offering, the Company was reimbursed by RAIT for offering
and related expenses, and received a fee from RAIT, in the aggregate amount of
$1.6 million. In June 1998, the Company acquired as part of a secondary offering
an additional 335,937 shares for $5.0 million. The Company currently holds
approximately 14% of RAIT's outstanding shares. In accordance with Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities," the Company has
12
<PAGE>
classified its investment in RAIT as an available-for-sale security which is
carried at market value as determined based on quoted market prices, and the
unrealized gain is reported net of tax as a separate component of stockholders'
equity. The unrealized gain was $930,000 net of deferred taxes of $419,000 at
June 30, 1998.
In addition to its direct investment in RAIT's common shares, in the
third quarter of fiscal 1998, the Company sold to RAIT two loans (each secured
by a different property) for their carrying value of $7.7 million. Each of these
loans had been originated for RAIT in connection with the Company's sponsorship
of RAIT. The Company retained a $1.3 million participation in one of the loans
that is subordinate to the $4.0 million participation interest held by RAIT and
to a $12.0 million senior lien interest held by an unaffiliated lender. Also in
the third quarter of fiscal 1998, the Company provided a first mortgage loan to
OSEB Associates, L.P. ("OSEB") which is owned by RAIT (89%) (which acquired its
interest in July 1998) and Brandywine Construction & Management, Inc. (11%) , a
property manager affiliated with the Company. The loan, funded by the Company in
June 1998 at a cost of $58.5 million, bears interest at 10% per year on a stated
principal amount of $65.0 million. The Company also received a fee of $840,000
(paid in August 1998) from OSEB in connection with these transactions.
Note 7 - Capital Stock Transactions
On April 29, 1998 the Company completed a public offering of 5.9
million shares of its common stock ("Common Stock"). The Company received net
proceeds (after underwriting discounts and commissions) of $120.1 million before
offering expenses of $894,000.
13
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
WHEN USED IN THIS FORM 10-Q, THE WORDS "BELIEVES," "ANTICIPATES,"
"EXPECTS" AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING
STATEMENTS. SUCH STATEMENTS ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES WHICH
COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY. READERS ARE CAUTIONED NOT TO
PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS WHICH SPEAK ONLY AS OF
THE DATE HEREOF. THE COMPANY UNDERTAKES NO OBLIGATION TO PUBLICLY RELEASE THE
RESULTS OF ANY REVISIONS TO FORWARD-LOOKING STATEMENTS WHICH MAY BE MADE TO
REFLECT EVENTS OR CIRCUMSTANCES AFTER THE DATE HEREOF OR TO REFLECT THE
OCCURRENCE OF UNANTICIPATED EVENTS.
Overview of Third Quarter of Fiscal 1998
The Company's gross revenues were $25.1 million in the third quarter of
fiscal 1998, an increase of $17.3 million (221%) from $7.8 million in the third
quarter of fiscal 1997. The increase in total revenues during the third quarter
of fiscal 1998 was primarily due to an increase of $14.1 million (317%) in the
revenues from the Company's real estate finance business to $18.5 million from
$4.5 million in the third quarter of fiscal 1997. To a lesser extent, the
increase in revenues was due to an increase of $1.5 million (80%) in equipment
leasing revenues to $3.4 million in the third quarter of fiscal 1998 from $1.9
million in the third quarter of fiscal 1997. Energy revenues were $1.5 million
in the third quarter of fiscal 1998, an increase of $77,000 (5%) from $1.4
million in the third quarter of fiscal 1997. Real estate finance (commercial and
residential mortgage loans) and equipment leasing revenues were 87% and 81% of
total revenues in the third quarter of fiscal 1998 and 1997, respectively.
Energy revenues were 6% and 18% of total revenues in the third quarter of fiscal
1998 and 1997, respectively.
As of June 30, 1998, total assets were $342.0 million, an increase of
$146.9 million (75%) from $195.1 million at September 30, 1997. Real estate
finance and equipment leasing assets were 65% and 53% of total assets at June
30, 1998 and September 30, 1997, respectively. Energy assets were 5% and 8% of
total assets at June 30, 1998 and September 30, 1997, respectively. Cash and
cash equivalents were 25% and 4% of total assets at June 30, 1998 and September
30, 1997, respectively. The percentage of cash and cash equivalents to total
assets increased primarily due to the receipt of the proceeds from a secondary
offering of Common Stock in April 1998 (the "1998 Stock Offering").
Subsequent to June 30, 1998, the Company agreed to acquire (the
"Acquisition"), through a subsidiary, The Atlas Group, Inc. ("Atlas"), a company
primarily involved in energy finance through the syndication of oil and gas
properties. The Acquisition is subject to conditions precedent, including the
Company's satisfactory completion of certain due diligence procedures. The
Acquisition agreement provides for the assumption of approximately $23.0 million
in debt by the Company's subsidiary and the issuance of approximately 2.0
million shares of Common Stock (subject to adjustment in the event the assumed
debt is greater or lesser than $23.0 million). The agreement provides for
incentive compensation (to a maximum of $15 million) equal to 10% of Atlas'
earnings in excess of a 15% annualized return on $70 million over a five year
period. Certain shareholders also may exchange up to 208,116 shares received in
the Acquisition for cash at a price of $24.025 per share exchanged. It is
anticipated that, if the Acquisition is completed, it will significantly
increase the percentage of the Company's assets and earnings that are related to
energy operations.
14
<PAGE>
Results of Operations: Real Estate Finance
The following table sets forth certain information relating to the
revenue recognized in the Company's real estate finance operations during the
periods indicated:
<TABLE>
<CAPTION>
Three Months Nine Months
Ended June 30 Ended June 30
------------------ ------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
(in thousands)
Revenues:
Commercial mortgage loan acquisition and resolution:
Interest........................................ $ 3,446 $1,454 $8,177 $3,588
Accretion of discount.......................... 2,275 1,100 5,872 2,603
Fees............................................ 1,430 7 5,085 1,421
Gains on refinancings, sales
of senior lien interests and loans............. 9,461 1,890 18,924 3,836
------- ------ ------ ------
16,612 4,451 38,058 11,448
------- ------ ------ ------
Residential mortgage lending:
Gains on sales of residential mortgage
loans......................................... 1,036 -- 3,673 --
Interest ...................................... 62 -- 581 --
Fees ........................................... 831 -- 1,496 --
------- ------ ------ -------
1,929 -- 5,750 --
-------- ------ ------- -------
$18,541 $4,451 $43,808 $11,448
======= ====== ======== =======
</TABLE>
The following table sets forth certain information relating to costs
and expenses incurred in the Company's real estate finance operations during the
periods indicated:
<TABLE>
<CAPTION>
Three Months Nine Months
Ended June 30 Ended June 30
----------------- -------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
(in thousands)
Costs and Expenses:
Commercial mortgage loan acquisition
and resolution......................................... $ 338 $ 241 $ 1,202 $907
Residential mortgage lending............................. 2,782 -- 6,426 --
------ ------- ----- ----
$3,120 $ 241 $ 7,628 $907
======= ======= ======= ====
</TABLE>
15
<PAGE>
Commercial Mortgage Loan Acquisition and Resolution. In recent years
and especially during fiscal 1998, the Company's resources have increased
considerably, enabling the Company to acquire loans much larger than those it
had previously acquired and to increase the amount of its average net investment
in loans. Prior to fiscal 1998, the Company had focused on acquiring loans with
outstanding receivable balances of between $1.0 million and $15.0 million with
investment costs typically between $1.0 million and $8.0 million. For loans
acquired through fiscal year ended September 30, 1997, the average receivable
balance was $6.1 million and the average investment cost (invested funds before
proceeds of refinancings or sales of senior lien interests) was $3.2 million.
During the nine months ended June 30, 1998, however, the Company acquired nine
loans having outstanding receivable balances ranging from $2.0 million to $131.9
million, with five of such loans having balances in excess of $19.0 million (and
three of those loans having receivable balances in excess of $44.0 million). The
average receivable balance during the nine month period ended June 30, 1998 was
$33.9 million. The Company's investment costs in the loans acquired during the
nine months ended June 30, 1998 ranged from $1.3 million to $79.2 million, with
an average investment cost of $24.3 million. The Company anticipates that it
will continue to acquire loans in excess of its previous historical receivable
balance and investment cost ranges, and that such loans may constitute a
substantial percentage of the Company's commercial loan portfolio.
Revenues from commercial mortgage loan acquisition and resolution
operations increased $12.2 million (273%) to $16.6 million in the third quarter
ended June 30, 1998. The increase was attributable to the following:
(i) An increase of $3.2 million (124%) in interest income
(including an increase of $1.2 million of accretion of
discount) resulting from an increase of $119.6 million in the
average amount of loans outstanding during that period to
$177.0 million as compared to $57.4 million in the average
amount of loans outstanding for the same period in the prior
fiscal year.
(ii) An increase of $7.6 million (401%) in gains recognized on the
refinancing or sale of senior lien interests in loans held by
the Company. This increase was primarily the result of an
increase in the number of loans in which senior lien interests
were sold (from three loans totaling $5.4 million in the third
quarter of fiscal 1997 to seven loans totaling $79.6 million
in the third quarter of fiscal 1998) including gains of $3.3
million and $4.9 million in connection with the sale of two
such loans.
(iii) An increase in fee income to $1.4 million in the third quarter
of fiscal 1998 from $7,000 in the third quarter of fiscal
1997. Fees received in the third quarter of fiscal 1998 arose
from a one-time fee of $525,000 for services to a borrower
whose loan the Company later acquired and a one-time fee of
$850,000 for services rendered to an existing borrower in
connection with the operation, leasing and supervision of a
property securing one of the Company's loans.
Revenues from commercial mortgage loan acquisition and resolution
operations increased $26.6 million (232%) to $38.1 million in the nine months
ended June 30, 1998. The increase was attributable to the following:
(i) An increase of $7.9 million (127%) in interest income
(including accretion of discount) resulting from an increase
of $93.7 million in the average amount of loans outstanding to
$134.3 million) during the nine months ended June 30, 1998 as
compared to $54.0 million in the average amount of loans
outstanding for the same period in the prior fiscal year.
16
<PAGE>
(ii) An increase of $15.1 million (393%) in gains from
refinancings, sales of senior lien interests and sales of
loans. This increase was primarily the result of an increase
in the number of loans sold or loans in which senior lien
interests were sold (from nine loans totaling $7.4 million in
the nine months ended June 30, 1997 to 32 loans totaling
$116.6 million in the nine months ended June 30, 1998). These
sales included, during the second quarter of fiscal 1998, a
sale to Resource Asset Investment Trust ("RAIT") (a real
estate investment trust sponsored by the Company) of 10
mortgage loans and senior lien interests in two other loans
resulting in proceeds of $20.2 million and a gain of $3.1
million.
(iii) An increase in fee income to $5.1 million in the nine months
ended June 30, 1998 from $1.4 million in the nine months ended
June 30, 1997. Fees received in the nine months ended June 30,
1998 consisted of the following: $830,000 for financial
advisory and consultation services related to the organization
and capitalization of RAIT; $3.3 million for services to
borrowers whose loans the Company later acquired; and a
one-time fee of $850,000 for services rendered to an existing
borrower in connection with the operation, leasing and
supervision of the collateral securing the Company's loan.
Gains on sale of loans and senior lien interests in loans (if any) and the
amount of fees (if any) received vary from transaction to transaction and there
may be significant variations in the Company's gain on sale and fee income from
period to period.
As a consequence of the foregoing, the Company's yield (gross
commercial mortgage acquisition and resolution revenues, including gains
resulting from refinancings, sales of loans and sales of senior lien interests
in loans, divided by average loan balances) increased to 38% in the third
quarter of fiscal 1998 as compared to 31% in the third quarter of fiscal 1997;
for the nine months ended June 30, 1998 as compared to 32% for the nine months
ended June 30, 1997, the yield was unchanged at 38%.
Costs and expenses of the Company's commercial mortgage loan
acquisition and resolution operations increased $97,000 (40%) to $338,000 and
increased $295,000 (33%) to $1.2 million in the three and nine month periods
ended June 30, 1998, respectively. The increases were primarily a result of
hiring additional personnel and legal costs associated with the expansion of
this operation.
As a result of the foregoing, the Company's gross profit from
commercial mortgage loan acquisition and resolution operations increased to
$16.3 million and $36.9 million in the third quarter and nine months ended June
30, 1998, respectively, as compared to $4.2 million and $10.5 million in the
same periods in the prior year.
Residential Mortgage Lending. During the third quarter and nine months
ended June 30, 1998, the Company originated 610 and 1363 residential mortgage
loans aggregating $25.4 million and $59.5 million, respectively. The Company may
opportunistically purchase residential mortgage loans although its focus is on
residential mortgage loan originations.
The Company sold residential mortgage loans with a book value of $23.4
million and $56.5 million during the third quarter and nine months ended June
30, 1998, respectively, resulting in gains of $1.0 million and $3.7 million,
respectively. These sales included, in the first quarter of fiscal 1998, the
sale of certain originated and acquired residential mortgage loans for a note in
the principal amount of $8.3 million (with a carrying value of $8.1 million) of
which $6.8 million had been paid through June 30, 1998. The $6.8 million payment
was funded by a
17
<PAGE>
loan to the purchaser from an unaffiliated bank which was guaranteed by the
Company and secured by the residential mortgage loans sold to the purchaser. The
Company has taken such guaranty into consideration in establishing its provision
for possible losses.
Costs and expenses associated with residential mortgage lending
operations were $2.8 million and $6.4 million for the third quarter and nine
months ended June 30, 1998, respectively, reflecting the commencement of
operations during the quarter ended December 31, 1997 and the increase in loan
originations.
Results of Operations: Equipment Leasing
The following table sets forth certain information relating to revenues
recognized in the Company's equipment leasing operations during the periods
indicated:
<TABLE>
<CAPTION>
Three Months Nine Months
Ended June 30 Ended June 30
----------------- ------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
(in thousands)
Revenues:
Small ticket leasing
Gain on sales of leases....................... $1,631 $1,055 $5,514 $2,131
Interest and fees............................. 1,011 324 2,373 620
Partnership management.......................... 422 417 1,398 1,338
Lease finance placement and
advisory services............................. 297 71 700 654
-------- -------- ------- --------
$3,361 $1,867 $9,985 $4,743
====== ====== ====== ======
</TABLE>
The following table sets forth certain information relating to costs
and expenses incurred in the Company's equipment leasing operations during the
periods indicated:
<TABLE>
<CAPTION>
Three Months Nine Months
Ended June 30 Ended June 30
----------------- ------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
(in thousands)
Costs and Expenses:
Small ticket leasing............................ $ 579 $538 $2,307 $1,260
Partnership management.......................... 319 312 1,038 1,006
Lease finance placement and
advisory services............................. 215 112 558 496
-------- ------ ------- ------
$1,113 $962 $3,903 $2,762
====== ==== ====== ======
</TABLE>
18
<PAGE>
During the third quarter and nine months ended June 30, 1998 the
Company experienced continued growth in its leasing business, originating 2,580
and 5,921 leases having a cost of $26.5 million and $59.5 million, respectively,
as compared to 931 and 1,829 leases having a cost of $9.7 million and $21.2
million, respectively, during the comparable prior year periods. In the third
quarter of fiscal 1998, the Company sold leases with a book value of
approximately $21.1 million to an unaffiliated special-purpose lease financing
entity in return for cash of $22.7 million, as compared to the third quarter of
fiscal 1997, in which the Company sold leases with a book value of $8.6 million
to an unaffiliated special purpose lease financing entity in return for cash of
$8.9 million and a note with a face value of $700,000. In the nine months ended
June 30, 1998, the Company sold leases with a book value of $53.3 million to
unaffiliated special purpose lease financing entities in return for cash of
$50.5 million and notes with an aggregate stated principal amount of $8.3
million, as compared to the nine months ended June 30, 1997 in which the Company
sold leases with a book value of $17.9 million to unaffiliated special purpose
lease financing entities for cash of $14.8 million and notes with an aggregate
stated principal amount of $5.2 million. Payment on the notes is subject to the
level of lease delinquencies and realization of residuals on the sold leases.
Revenues from equipment leasing increased $1.5 million (80%) to $3.4 million and
$5.2 million (111%) to $10.0 million for the third quarter and nine months ended
June 30, 1998, respectively. The increase in revenues for both the quarter and
nine months ended June 30, 1998 compared to the prior year period was
attributable to (i) an increase in the gain on sales of leases of $576,000 (55%)
for the quarter and $3.4 million (159%) for the nine months resulting from the
increased number of leases sold by the Company and (ii) an increase in interest
and fee income of $687,000 (212%) for the quarter and $1.8 million (283%) for
the nine months resulting from the increased volume of lease originations.
Equipment leasing costs and expenses increased $151,000 (16%) to $1.1
million and increased $1.1 million (41%) to $3.9 million in the third quarter
and nine months ended June 30, 1998 respectively, as compared to same periods in
the prior year. For the third quarter of fiscal 1998, the increase was primarily
a result of higher commissions paid in the lease finance placement and advisory
services operation as a result of an increased volume of placement transactions
(nine placements amounting to $8.2 million, by cost, of leases during the third
fiscal quarter of 1998 as compared to two placements amounting to $3.5 million,
by cost, of leases in the third fiscal quarter of 1997). For the nine months
ended June 30, 1998, the increase was primarily a result of higher operating
costs associated with the increase in lease originations.
During the quarter ended June 30, 1998, the Company began to retain for
its own account the residual values of leases sold. Prior to this quarter the
Company had sold its residual interests, primarily for promissory notes
(aggregating $14.4 million at June 30, 1998) from unaffiliated special purpose
financing entities. The Company anticipates that it will continue to retain
residual interests for its own account; however, there is no established Company
policy as to the retention or sale of residuals and, accordingly, the Company
may determine to sell residuals in the future. The effect of retaining residuals
is to reduce revenues recognized from the sale of leases at the time of sale
while increasing revenues anticipated to be derived in the future from the
realization of residuals. At June 30, 1998, unrealized residuals were $2.9
million.
19
<PAGE>
Results of Operations: Energy
Oil and gas production revenues decreased 1% in the third quarter of
fiscal 1998 and increased 13% in the nine months ended June 30, 1998, compared
to the same periods of the previous fiscal year. A comparison of the Company's
revenues, daily production volumes, and average sales prices follows:
<TABLE>
<CAPTION>
Three Months Nine Months
Ended June 30 Ended June 30
------------------- -----------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues (in thousands)
Gas...................................................... $ 822 $ 803 $ 2,730 $ 2,311
Oil................................................... $ 156 $ 198 $ 505 $ 561
Production Volumes
Gas (thousands of cubic feet ("mcf")/day)................ 3,684 3,360 3,808 3,261
Oil (barrels ("bbls")/day)............................... 130 119 122 100
Average Sales Prices
Gas (per mcf)............................................ $ 2.45 $ 2.63 $ 2.63 $ 2.60
Oil (per bbl)............................................ $13.15 $ 18.33 $ 15.13 $ 20.54
</TABLE>
Natural gas revenues increased $19,000 (2%) in the third quarter and
$419,000 (18%) in the nine months ended June 30, 1998, compared to the same
periods of the prior fiscal year, due to 9% and 17% increases in production
volumes, partially offset (in the quarter but not the nine months) by a 7%
decline in the average sales price per mcf. Oil revenues decreased $42,000 (21%)
and $56,000 (10%) in the third quarter and nine months ended June 30, 1998,
respectively, compared to the same periods of fiscal 1997, due to 28% and 26%
decreases in the average sales price in the quarter and nine months ended June
30, 1998, respectively. The decreases were partially offset by 9% and 22%
increases in production volumes as compared to the same periods of fiscal 1997.
Both gas and oil volumes were favorably impacted by two acquisitions of
interests in 431 wells located in Ohio and New York, one in the third quarter of
fiscal 1997 and the other in the first quarter of fiscal 1998. These
acquisitions accounted for increases of 13% and 23% in gas production volumes
and 17% and 19% in oil production volumes, respectively, as compared to the
third quarter and first nine months of fiscal 1997.
20
<PAGE>
A comparison of the Company's production costs as a percentage of oil and
gas sales, and the production cost per equivalent unit for oil and gas, for
the third quarter and nine months ended June 30, 1998 and 1997 is as follows:
<TABLE>
<CAPTION>
Three Months Nine Months
Ended June 30 Ended June 30
---------------- -------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Production Costs
As a percent of sales........................... 51% 42% 45% 41%
Gas (mcf)....................................... $ 1.24 $ 1.16 $ 1.20 $ 1.13
Oil (bbl)....................................... $ 7.46 $ 6.96 $ 7.17 $ 6.78
</TABLE>
Production costs increased $89,000 (21%) to $520,000 and $305,000 (26%)
to $1.5 million in the third quarter and nine months ended June 30, 1998,
respectively as compared to the same periods in the prior year as a result of
the acquisition of the interests in producing properties referred to above and
well workovers.
Amortization of oil and gas property costs as a percentage of oil and
gas revenues was 20% and 18% in the third quarter and nine months ended June 30,
1998 compared to 19% and 20% in the third quarter and nine months ended June 30,
1997. The variance from period to period was directly attributable to changes in
the Company's oil and gas reserve quantities, product prices and fluctuations in
the depletable cost basis of oil and gas properties.
Results of Operations: Other Revenues, Costs and Expenses
Interest and other income increased $1.6 million (2,514%) to $1.7
million and $2.6 million (976%) to $2.8 million, in the third quarter and nine
months ended June 30, 1998, respectively, as compared to the same periods in the
prior year, as a result of the substantial increase in the Company's uncommitted
cash balances and the temporary investment of such balances. In addition, in the
third quarter of 1998, the Company was reimbursed for payroll and administrative
costs in the amount of $513,000 for services provided to a partnership in
connection with the partnership's investment in an unrelated business. The
Company's President is the president of the general partner of the partnership.
The Company also recognized dividend income of $240,000 from RAIT in the third
quarter of fiscal 1998.
General and administrative expenses increased $423,000 (67%) to $1.1
million, and $1.7 million (108%) to $3.3 million, in the third quarter and nine
months ended June 30, 1998, respectively, as compared to the comparable prior
year periods, primarily as a result of the hiring of additional corporate staff,
increases in the compensation of senior officers, and the cost of benefits
provided to senior officers (principally the Company's contribution to establish
the supplemental retirement plan required under the employment contract with the
Company's Chairman and Chief Executive Officer), together with an increase in
occupancy costs as the Company leased additional office space to accommodate its
increased staff.
Interest expense increased $5.0 million (709%) to $5.7 million, and
$12.0 million (698%) to $13.7 million, in the third quarter and nine months
ended June 30, 1998, respectively, from the comparable prior year periods
reflecting the increase in borrowings (primarily the Company's 12% Senior Notes
due 2004 that were sold in an offering completed in July 1997) to fund the
growth of the Company's real estate finance and equipment leasing operations.
21
<PAGE>
Provision for possible losses increased to $263,000 and $1.2 million in
the third quarter and nine months ended June 30, 1998 from $157,000 and $303,000
in the third quarter and nine months ended June 30, 1997. The increases were
primarily as a result of an increased provision for possible losses relating to
equipment leasing of $165,000 and $790,000 and for possible losses relating to
real estate finance of $98,000 and $414,000 in the quarter and nine months ended
June 30, 1998, respectively. The increased provisions reflect the increases in
lease originations and investments in real estate loans. In establishing the
Company's allowances for possible losses in connection with its real estate
finance and equipment leasing operations, the Company considers, among other
things, the historic performance of the Company's loan or lease portfolios,
industry standards and experience regarding losses in similar loans or leases
and payment history on specific loans and leases, as well as general economic
conditions in the United States, in the borrower's or lessee's geographic area
and in its specific industry.
The effective tax rate increased to 31% in the third quarter and nine
months ended June 30, 1998, respectively, from 28% and 24% in the third quarter
and nine months ended June 30, 1997 based upon the Company's anticipated
earnings and stability in the amount of the Company's depletion, tax credits and
tax exempt interest.
Liquidity and Capital Resources
The Company's primary liquidity needs are for continued expansion of
its real estate finance and small ticket leasing subsidiaries, activities that
have been at the core of the Company's growth strategy. The Company will add to
its commercial mortgage loan acquisition and resolution loan portfolio as
economically attractive opportunities become available and will also continue to
originate residential loans. In addition, it expects substantial ongoing growth
in its small ticket leasing activities. In energy, the Company seeks to increase
its reserve base through selective acquisition of producing properties and other
assets and further development of its existing gas and oil interests. The
Company from time to time also considers acquisitions of energy industry
companies. Subsequent to the end of the third fiscal quarter, the Company
entered into an agreement to acquire Atlas, which is primarily engaged in energy
finance through the syndication of oil and gas properties. See "Overview of
Third Quarter of Fiscal 1998."
Thus far, the Company has been able to finance each of these activities
through a variety of sources, including internally generated funds, borrowings
(including borrowings under five separate credit facilities with an aggregate
credit limit of $78.0 million, of which $3.1 million was drawn at June 30,
1998), sales of equipment leases under two forward sale facilities with an
aggregate sale limit of $150.0 million, and public and private sales of notes
and common stock. On April 29, 1998 the Company completed the 1998 Stock
Offering and received net proceeds (after underwriting discounts and
commissions) of $120.1 million before offering expenses of $894,000. The
Company's growth will depend upon the Company's ability to finance future
activities in a similar manner or to identify alternative financing sources.
22
<PAGE>
Sources and (uses) of cash for the nine month periods ended June 30,
1998 and 1997 were as follows:
<TABLE>
<CAPTION>
Nine Months Ended
June 30
-----------------
1998 1997
---- ----
<S> <C> <C>
(in thousands)
(Used in) provided by operations........................ $ (4,309) $ 2,834
(Used in) investing activities.......................... (99,243) (37,248)
Provided by financing activities........................ 118,643 33,150
------- ------
Increase (decrease) in cash and cash
equivalents.......................................... $ 15,091 ($ 1,264)
======== =======
</TABLE>
The Company had $84.4 million in cash and cash equivalents on hand at
June 30, 1998, as compared to $69.3 million at September 30, 1997. The Company's
ratio of current assets to current liabilities was 5.0:1 at June 30, 1998 and
6.7:1 at September 30, 1997. Working capital at June 30, 1998 was $71.8 million
as compared to $61.4 million at September 30, 1997. The Company's ratio of
earnings to fixed charges was 3.2:1 in the quarter ended June 30, 1998 as
compared to 6.8:1 in the quarter ended June 30, 1997.
Cash provided by operating activities in the first nine months of
fiscal 1998 decreased $7.1 million as compared to the first nine months of
fiscal 1997 primarily as a result of the following: increases in net income and
other non-cash adjustments of $10.9 million and $2.7 million, respectively;
increases in gains on asset dispositions, accretion of discount and collection
of interest income of $22.1 million, $3.3 million and $3.8 million,
respectively; increases in operating assets of $2.1 million; and increases in
operating liabilities of $3.1 million.
The Company's cash used in investing activities increased $62.0 million
in the nine months ended June 30, 1998 as compared to the nine months ended June
30, 1997. This increase resulted primarily from an increase in the amount of
cash used to fund increased real estate finance and small ticket leasing
activities. In commercial mortgage loan acquisition and resolution, the Company
invested $213.1 million and $33.7 million in the acquisition, origination or
funding of ten loans in each of the nine months ended June 30, 1998 and 1997,
respectively. In addition, the Company advanced funds on existing commercial
loans of $5.1 million and $1.4 million, respectively, in the same periods. Cash
proceeds received upon refinancings or sales of senior lien interests and loans
amounted to $147.6 million (including sales to RAIT) and $6.3 million in the
nine months ended June 30, 1998 and 1997, respectively. These proceeds reflect
the sale of loans and senior lien interests in or refinancing of 32 and nine
loans, respectively. In small ticket leasing, the Company invested $59.5 million
and $21.2 million in the origination of 5,932 and 1,510 leases in the nine
months ended June 30, 1998 and 1997, respectively. Cash proceeds received upon
sales of leases amounted to $50.5 million and $17.3 million in the nine months
ended June 30, 1998 and 1997, respectively. The Company invested $59.5 million
in 1,363 residential mortgage loans during the nine months ended June 30, 1998,
and, during that period, received cash proceeds from the sale of loans of $53.6
million.
The Company's cash flow provided by financing activities increased
$85.5 million during the nine months ended June 30, 1998 as compared to the nine
months ended June 30, 1997 primarily as the result of the 1998 stock offering.
23
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits
a) Exhibits:
11.1 Calculation of Basic and Diluted Earnings Per Share.
27 Financial Data Schedule
24
<PAGE>
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 thereunto duly authorized.
RESOURCE AMERICA, INC.
(Registrant)
Date: August 14, 1998 By: /s/ Steven J. Kessler
--------------- ------------------------------------------------
Steven J. Kessler
Senior Vice President and Chief Financial Officer
Date: August 14, 1998 By: /s/ Nancy J. McGurk
--------------- ---------------------
Nancy J. McGurk
Vice President - Finance and Treasurer
25
<PAGE>
EXHIBIT 11.1
CALCULATION OF BASIC AND
DILUTED EARNINGS PER SHARE
BASIC EARNINGS PER SHARE
<TABLE>
<CAPTION>
Three Months Nine Months
Ended June 30 Ended June 30
-------------------- -----------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income $ 8,367 $ 2,930 $18,637 $ 7,750
Weighted average number of
shares outstanding 18,189 10,687 15,544 9,627
Net income per common share - basic $ .46 $ .27 $ 1.20 $ .81
======== ====== ======== =======
DILUTED EARNINGS PER SHARE
Net income $ 8,367 $ 2,930 $18,637 $ 7,750
Weighted average number of shares 18,189 10,687 15,544 9,627
Dilutive effect of outstanding options
and warrants (as determined by the
application of the treasury stock method) 605 3,220 543 3,083
-------- ------ ------- -------
18,794 13,907 16,087 12,710
Net income per common share - diluted $ .45 $ .21 $ 1.16 $ .61
========= ======= ======= =======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> SEP-30-1997 SEP-30-1998
<PERIOD-END> JUN-30-1997 JUN-30-1998
<CASH> 2,890,547 84,370
<SECURITIES> 0 13,323
<RECEIVABLES> 1,145,206 3,020
<ALLOWANCES> 0 1,657
<INVENTORY> 0 0
<CURRENT-ASSETS> 4,704,654 89,606
<PP&E> 28,668,457 31,860
<DEPRECIATION> 15,543,823 16,440
<TOTAL-ASSETS> 89,530,984 342,019
<CURRENT-LIABILITIES> 2,975,632 17,771
<BONDS> 25,119,096 117,548
0 0
0 0
<COMMON> 37,144 209
<OTHER-SE> 57,983,285 204,223
<TOTAL-LIABILITY-AND-EQUITY> 89,530,984 342,019
<SALES> 2,922,159 3,294
<TOTAL-REVENUES> 20,520,932 61,504
<CGS> 1,296,132 1,912
<TOTAL-COSTS> 10,348,825 34,478
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 30,300 1,204
<INTEREST-EXPENSE> 1,720,983 13,726
<INCOME-PRETAX> 10,244,417 27,037
<INCOME-TAX> 2,494,000 8,400
<INCOME-CONTINUING> 7,750,417 18,637
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 7,750,417 18,637
<EPS-PRIMARY> .81 1.20
<EPS-DILUTED> .61 1.16
</TABLE>
